The data available so far for the fourth quarter of 2012 points to a marginal contraction of the economy. Manufacturing output, retail sales, exports and tax revenues are all falling. The big question is whether GDP will also fall in the first quarter of 2013. The Markit/CIPS manufacturing purchasing managers index (PMI) rose to a 15-month high in December, boding well for an upturn in goods production. Exports may also pick up, as the Eurozone crisis seems to be abating. However, services PMI showed the steepest fall in activity for two years in December, boding ill for this far larger slice of the economy. Consumer and business confidence both remain very low, which looks set to stymie any service sector recovery in the first quarter and also hold back investment. With the UK facing the prospect of snow, the resulting disruption to the economy will add to the chance of a triple-dip recession.
Chris Williamson is chief economist at Markit.
Britain’s economy remains weak and inadequate. Since the recession of 2008-09, the economy has failed to stage a sustainable recovery. But fears that we entered a “triple dip recession” in the fourth quarter of 2012 are unjustified. Official Office of National Statistics (ONS) figures suggest that GDP suffered declines between the end of 2011 and the middle of 2012, followed by a rebound in the third quarter of 2012. Growth is clearly poor, but the official statistics are excessively gloomy and conflict with evidence of strong job creation. Fears that the economy has returned to negative growth in the fourth quarter of 2012 are also not supported by our recent surveys, which show an improvement in business confidence. I expect the ONS to announce zero growth on 25 January. But even negative growth will not be a recession, which requires two negatives. The preliminary ONS figures are also based on partial information, which may be revised.
David Kern is chief economist of the British Chambers of Commerce.