ONS: GDP down by 0.3% in Q4 2012

Estimates present problems for the government.

The ONS has released the preliminary estimates for GDP growth in the fourth quarter of 2012: it fell by 0.3 per cent. That's worse than the OBR/Treasury's forecast of a 0.1 per cent contraction, but the Treasury says the news was "not unexpected".

The OBR will be able to defend its record somewhat, because 0.2 percentage points of the contraction are due to a significant reduction in oil and gas extraction. The ONS explains that this is resulting from "an extended and later than usual maintenance period at the UK’s largest North Sea oil field". Expect a number of commentators to rapidly become experts on North Sea oil, and why the shock should or shouldn't let the chancellor off the hook.

Nonetheless, this represents the only the latest time the OBR has been overly optimistic about GDP projections. Economic forecasts are usually wrong; but they are usually wrong symmetrically. The persistent bias — mathematically, that is — must eventually raise questions about the OBR's model.

The hit to oil extraction led to mining output falling by 10.2 per cent in the quarter, the biggest decline on record, and led to the production sector overall falling by 1.8 per cent — a contraction which was exacerbated by the continued steady contraction in manufacturing, down 1.5 per cent.

The news was less bad in other sectors, but agriculture, forestry and fishing experienced still a contraction of 0.6 per cent, while the service sector was flat. Some of that stagnation in services may be due to some "fall-back" following the Olympic games, as the impact of spending being concentrated on one period comes back to bite. The one top-level sector which experienced growth was construction, where output increased by 0.3 per cent.

The overall contraction presents the strong possibility that the UK is going to have a "triple-dip" recession, if the next quarter is negative as well. Such a sustained period of bouncing between recession and mere stagnation would be unprecedented in recent economic history. Even if we don't have a triple-dip, growth for the whole of 2012 remains exactly flat, and there are no high expectations for growth going in to 2013. We have a corrugated economy, going up and back down periodically, but with a clear — and terrifying — trend of stagnation.

The Chancellor in Davos in 2012. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
Show Hide image

Who will win in Manchester Gorton?

Will Labour lose in Manchester Gorton?

The death of Gerald Kaufman will trigger a by-election in his Manchester Gorton seat, which has been Labour-held since 1935.

Coming so soon after the disappointing results in Copeland – where the seat was lost to the Tories – and Stoke – where the party lost vote share – some overly excitable commentators are talking up the possibility of an upset in the Manchester seat.

But Gorton is very different to Stoke-on-Trent and to Copeland. The Labour lead is 56 points, compared to 16.5 points in Stoke-on-Trent and 6.5 points in Copeland. (As I’ve written before and will doubtless write again, it’s much more instructive to talk about vote share rather than vote numbers in British elections. Most of the country tends to vote in the same way even if they vote at different volumes.)

That 47 per cent of the seat's residents come from a non-white background and that the Labour party holds every council seat in the constituency only adds to the party's strong position here. 

But that doesn’t mean that there is no interest to be had in the contest at all. That the seat voted heavily to remain in the European Union – around 65 per cent according to Chris Hanretty’s estimates – will provide a glimmer of hope to the Liberal Democrats that they can finish a strong second, as they did consistently from 1992 to 2010, before slumping to fifth in 2015.

How they do in second place will inform how jittery Labour MPs with smaller majorities and a history of Liberal Democrat activity are about Labour’s embrace of Brexit.

They also have a narrow chance of becoming competitive should Labour’s selection turn acrimonious. The seat has been in special measures since 2004, which means the selection will be run by the party’s national executive committee, though several local candidates are tipped to run, with Afzal Khan,  a local MEP, and Julie Reid, a local councillor, both expected to run for the vacant seats.

It’s highly unlikely but if the selection occurs in a way that irritates the local party or provokes serious local in-fighting, you can just about see how the Liberal Democrats give everyone a surprise. But it’s about as likely as the United States men landing on Mars any time soon – plausible, but far-fetched. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.