Tuesday, January 25, 2011
Absolutely awful GDP figures
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

The Office for National Statistics has done it again. After two quarters in which gross domestic product surprised on the upside, the fourth quarter numbers shocked spectacularly on the downside. The gloomiest forecasters predicted only a tiny rise in GDP. As it was, it fell by 0.5%. The 12-month rate of increase slumped to 1.7%.

There are just over 90 days in a quarter. Take out one of them because of bad weather and GDP falls by 1% or so. That, it has to be hoped, is what happened, or something like it - GDP would have risen by 0.5% but weather knocked it back to minus 0.5%. The ONS's current view, that GDP was flat setting aside weather effects, is almost too gloomy to contemplate ahead of this year's fiscal tightening.

These figures have radically changed the picture for 2010, growth for which is now put at just 1.4%, and will have unnerved the government just days after Ed Balls's arrival as shadow chancellor. After Q4 falls of 0.5% in service sector output and a 3.3% drop in construction there should be a decent bounce in the first quarter of 2011 but nothing is guaranteed. More here.

The news on the public finances was a bit better, despite an apparent explosion in debt from taking RBS and Lloyds fully onto the public sector balance sheet. December's borrowing of 16.8 billion was about 3 billion less than feared. Cumulative borrowing in 2010-11 of 118.4 billion is down from 126.8 billion last year. More here.