The Economy

The economy grew by 0.1% in the last quarter of 2009, bringing to an official end the longest recession since records began in 1955, but this in not something that we should get too excited about – either way. On the one hand, people are disappointed that the growth in Gross Domestic Product (GDP) was only a tenth of one percent – a quarter of the level expected by many commentators. On the other, there was relief that we are at least back in positive territory now.
The reason for a degree of optimism for those who were disappointed is that the Office for National Statistics has a habit of reassessing the figures as it goes and in both the second and third quarters of 2009, the revisions were upwards – mind you, for the four preceding quarters, the revisions were downwards, but that was simply following the trend; since we are now moving upwards, we can be (reasonably) confident that the revisions will be positive. If not, the next general election could be even more interesting!
The potential fly in the ointment, however, is that there were special circumstances that may have increased consumer spending in the final months of last year, especially the impending VAT rise on 1st January and deep discounting by retailers, both of which will have added to GDP growth. Equally, with an eye to the first three months of this year, the VAT increase may have an impact on manufacturing and sales and the bad weather we have experienced will have slowed retail spending – although it will also have increased expenditure on heating. Mind you, according to the Centre
for Economics and Business Research, the extreme winter of 1962/3 may have reduced manufacturing output by 7% in February, but there was actually no overall impact on GPD due to increased spending in other areas.