Tuesday, 25 January 2011

UK economy shrinking again but borrowing down

Today we have a couple of very significant statistics published: GDP for the previous quarter (Oct 2010 through Dec 2010) was -0.5%, yes minus half a percent. Informed opinion was expecting something like plus half a percent. Government spinners are blaming the snowy weather we experienced at the tail end of last year.

But realistically, a 0.5% drop means £6.5bn drop in output. Even without the two or three days of serious snow GDP would have been flat-lining.

Here's the Beeb's GDP graph....

As you can see, it's double dip time. And this dip is looking sharper than the previous one. However we'll need to wait another quarter to see if this is actually the start of another recession (recessions are two or more consecutive quarters of negative growth) or just a blip.

On the plus side the government only borrowed £15.3bn in December, down from £19.7bn in November. The big drop is almost entirely explained in the ONS publication by a fall in "investment". This means the government is spending less building things and buying things. This is probably a good thing.

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