No good, no bad....just ugly

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GDP fell an estimated 0.3% in the fourth quarter of 2012; economy flat year-on-year

Manufacturing output fell 1.5% on the quarter; down 1.8% on the year

While the usual caveats apply to ONS's first cut of GDP data, they nevertheless make for pretty gloomy reading.

  • The UK has seen one quarter of growth out of the past five
  • Output is still more than 3% lower than its pre-recession peak
  • Quarterly manufacturing output is lowest since 2010q2

As ever, there are some factors which explain away some of contraction. There is inevitably some unwinding of the Olympics boost in Q3 and the whooping 10% fall in mining and quarrying output in the quarter is partly down to some disruptions to North Sea oil and gas fields. Even accounting for this, there is still little sign of any underlying growth.

However, these figures tell us only about the past. There are some factors that indicate that 2013 may not be as bad as the last one. For example, concerns about the prospect of one or more members exiting the eurozone have diminished (although that's not to say that economies there are on the up) and better labour market statistics and lower inflation should make a brighter year for households. For manufacturers, EEF's recent Executuve Survey suggested that pessimism about the next 12 months had not entirely taken hold, with some hope that companies could secure growth on the back of new products and in new markets.

Note: However, contrary to some commentary Sterling's depreciation over just a few weeks will not be game changing in the short term.

Author

Chief Economist

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