Today’s UK GDP figures provide a welcome ray of light after several quarters of unremitting gloom from the official statisticians. The underlying state of the economy is, of course, not as good as shown in the headline growth rate of 1 per cent in Q3 (4 per cent annualised compared with Q2). But previous quarters were wrong in the other direction, not least because of the infuriating tendency of the Office for National Statistics to understate GDP in its initial estimates for each period.
Stripping out the effects of the Jubilee Bank Holiday and the Olympics, the underlying growth rate in Q3 is probably about 0.2-0.3 per cent (0.8-1.2 per cent annualised). Kevin Daly at Goldman Sachs produces a UK activity indicator that has been growing at an annualised rate of about 1 per cent throughout 2012. This is scarcely an acceptable rate, considering how far real GDP fell during the recession in 2008/2009, but nor is it as bad as is often suggested.
The economy has not, in reality, fallen into a double dip recession this year. And because productivity growth has been so low, this low rate of GDP growth has been associated with a sharp pick-up in private sector employment. Unsatisfactory, but far from catastrophic, would seem to me the right verdict. Read more