The UK economy experienced a fall in GDP in the fourth quarter of 2012, according to provisional estimates released by the ONS today. The 0.3% fall, which comes on the back of positive news on jobs, means that the UK has now experienced negative growth for four out of the last five quarters, and provides a clear indication that the UK is on the verge of experiencing an unprecedented ‘triple dip’ recession. While these figures are subject to official revision, it is unlikely that they will be revised upwards sufficiently to get into positive territory – indeed the real picture may be even worse than those published today.
A decline in the output of productive industries by 1.8% was the major culprit, accounting for 90% of the overall decline (- 0.28%), with construction output up 0.3%, and service output unchanged. Of the productive industries, manufacturing showed the most weakness.
This certainly puts a dampener of the positive news from the labour market, where the unemployment rate fell by 0.1%, to 7.7%, and while in the past increases in employment could be put down to movements between unemployment and part-time work, this time the improvements appear to have more substance to them. New on the inflation front has also been positive, with the CPI stuck at 2.7% – still above target, but more likely to fall than rise during the first half of 2013. However, with inflation still above average wage rises, real incomes will be squeezed further. The continued squeeze on incomes mans that at the end of 2012 incomes were 13.2% below their pre-recession level in Q1 of 2008.