Surprising figures just released by the ONS show that Gross Domestic Product (GDP) increased by 0.1% in the fourth quarter of 2009, compared with a decrease of 0.2% in the third quarter. This was put down to growth in both services and production.
However, this figure was quite surprising as most commentators were expecting a larger rise, even up to 0.4%, although this does follow on from six consecutive quarters of negative growth. The UK recession commenced in the April-June quarter of 2008 and the economy has contracted by 6.0% over this period.
So, not so much ‘out of the woods’ at the moment, but at least we can see a patch of blue sky through the trees. One thing to bear in mind is that this preliminary estimate of GDP is made with only about 40% of the data available and every first estimate since the first quarter of 2007 has been revised later.
The 0.1% GDP growth was due to growth in production industries and services.
The detailed figures show that total production output rose by 0.1% in the fourth quarter, compared with a fall of 0.9% in the previous quarter. The largest contribution to this was seen from the manufacturing sector which recorded a rise of 0.4%, compared with a fall of 0.2% in the previous quarter.
So we have got a little bit of good news, but it is a bit like your favourite aunt only putting £10 in your birthday card when she usually gives you £20 – it’s welcome but at the same time a bit of a let down. Of course, we should remember too the news posted last week that unemployment had fallen for the first time in 18 months.
The question now is what the political responses will be. Yesterday, Gordon Brown said: “The biggest mistake we in Britain and individual countries could make would be to withdraw now from the supportive actions we need for growth and jobs.”
This was countered by David Cameron who was demanding more urgent action and said: “That means some reduction in public spending plans in this coming financial year.”
It seems probable that today’s GDP announcement will give more strength to the government’s argument. Perhaps, a refusal to cut spending before the election is not a political move after all? Okay, perhaps not.
Tags: economic growth, Gross domestic product, Manufacturing, production, recession, services
