It turns out that the economy shrank by even more than we thought in the final three months of 2010. The Office for National Statistics has just revised figures for the fourth quarter downwards from -0.5 per cent to -0.6 per cent.
Significantly, the ONS maintains that -0.5 per cent of the decline was attributable to the snow. In other words, even if we strip out the effect of the Arctic conditions, the economy still shrank by 0.1 per cent.
Here’s an updated version of my graph “The snow didn’t stop growth elsewhere”.
It’s worth noting that the figures would have been even worse if government spending had not increased by 0.7 per cent (adding 0.16 per cent to growth). Consumer spending fell by 0.1 per cent – the first drop in 18 months – and investment dropped 2.4 per cent. There is little evidence that the private sector is ready to pick up the slack.
But the $64,000 question remains: was this a one-off blip, or is the UK heading for a double-dip recession? The forward indicators suggest that the economy bounced back at the start of the year, but George Osborne’s nerves will have grown this morning.