The UK economy contracted in the final three months of 2012, according to the latest official data, while the recent bad weather has increased the risk of GDP shrinking again at the start of 2013.
Figures from the Office for National Statistics show the UK output shrank by 0.3 per cent over the final quarter of the year, worse than the consensus estimate of a 0.1 per cent fall. However, this is the ONS’ preliminary estimate and could be subject to revision in the months ahead.
Output from construction rose by 0.3 per cent over the quarter but this failed to offset the 1.8 per cent contraction in the production industries. The dominant services industry experienced flat output.
Schroders European economist Azad Zangana says: “Part of the negative hit to growth was caused by an Olympics hangover, where the boost seen in the third quarter disappeared. This should be seen as a one-off hit to the economy. However, now that a negative GDP figure has been recorded, there is a significant risk that the UK economy suffers a triple-dip recession.”
The fourth quarter’s contraction follows the 0.9 per cent expansion that was seen in the third quarter, as the country benefited the boost provided by the London Olympic Games over the summer. If output falls during the first quarter of 2013 – which some economists think could be caused by the recent snow – the country would have suffered an unprecedented triple-dip recession.
IHS Global Insight chief UK and European economist Howard Archer says: “Given the UK’s ability to grind to a halt with even a flake, the snow has come at a very brittle time for the economy, adding to the headwinds that it is already battling against as it tries to avoid a triple-dip recession.
“With the economy in a fragile state, even relatively limited disruption from snow and freezing conditions could very well be enough to tip the balance towards modest GDP contraction rather than modest growth in the first quarter of this year.”