Has the UK really fallen back into recession?
By John Hawksworth, Chief Economist
Today's preliminary data showed a small decline in GDP of 0.2% in the first quarter of 2012, implying a mild technical recession following the 0.3% drop in Q4 2011. However, these are only very preliminary data and there are reasons to believe that they could ultimately be revised up given that services growth of just 0.1% appears weak compared to indications from the Purchasing Managers Index (PMI) and other business surveys. Also, a 3% fall in construction output in Q1 2012 seems much weaker than recent construction PMI surveys would suggest.
Furthermore, a longer run perspective shows real GDP in Q1 2012 unchanged from a year earlier, while excluding volatile oil and gas output it was actually up slightly by 0.2% over the past year. So a reasonable representation of the data for the last year is that the economy has been relatively flat. Other indicators, such as the recent small fall in unemployment in the three months to February and the relatively strong retail sales growth figures for March, would also point to an economy showing very modest underlying growth rather than one heading back into recession.
There are still many uncertainties surrounding the future economic outlook, not least in regard to the ongoing eurozone crisis and global oil prices. The UK economy is clearly still going through a difficult period but nothing like the deep recession we saw in 2008 and early 2009. So we need to put these latest GDP figures into perspective and not talk the economy down too much on the basis of one set of highly preliminary estimates.
Contact: John Hawksworth | Tel: +44 (0)20 7213 1650