Wednesday, April 25, 2012
Computer says no - ONS says GDP down 0.2%
Posted by David Smith at 11:45 AM
Category: Thoughts and responses

As feared, the Office for National Statistics has done it again. A 3% drop in construction output in the first quarter and growth of just 0.1% in the service sector has pushed Britain back into technical recession. Gross domestic product fell by 0.2% in the first quarter, following a 0.3% drop in the fourth quarter of 2011.

The fall in GDP in the first quarter, foreshadowed by the Bank of England when it described the ONS figures as "perplexing", is indeed puzzling. To be fair to the ONS, it has worked quite hard to prevent the construction figures from dragging down the GDP number by even more, setting out a range of assumptions on what might have happened to the sector in March. It could easily have slotted in a bigger negative number for construction.

But 0.1% growth in the service sector looks implausiably weak (as, despite the ONS's transparency does construction). It leaves egg on the faces of the Office for Budget Responsibility, Bank of England and government. The figures will be revised, but not for a while. In the meantime, the risk is of a hit to confidence. More on the figures here.

Shortly after the figures were released the CBI reported that business confidence among manufacturers was at its highest for two and a half years. Until the surveys are reflected in the official data, however, that looks like small comfort.