Remember where you read it first. As the economy plunged into its third – and deepest – quarter of contraction last summer, this blog announced that the recession was over – but warned that GDP would be shrinking again by the end of 2012. Sure enough, the economy bounced up in the third quarter and is now revealed to have shrunk by 0.3 per cent in the final three months.
While other commentators – and official economists – completely failed to forecast the direction of the economy, this blog declared last August, just after statistics showed output plunging by a catastrophic 0.7 per cent in the second quarter, that “The recession is over.” However, the headline added: “Is triple-dip looming?”
That 0.7 per cent was subsequently revised to a 0.4 per cent fall in GDP but it followed two previous quarters in which the economy shrank by similar amounts. Then, as predicted, the recession ended in the third quarter, when the economy bounded up by 0.9 per cent (revised down from an initial calculation of 1.0 per cent).
That August blog stated: “Q3 will be better than the disastrous Q2 – and that means the run of falling GDP figures will be broken and the recession will end.” But we added: “Q4 will be negative again – worse than the third quarter. If the economy grows and falls again he [George Osborne] risks being the first chancellor to preside over a treble dip.”
When the positive third-quarter figure was published in October we declared: “Unless GDP is revised down, treble dip is likely”. Still the consensus was for growth in the fourth quarter though.
Eventually the Bank of England governor followed our argument and admitted in November that the economy was probably going backwards again. As we said: “You don’t have to be an economist to forecast that the economy will contract again in the final quarter of 2012 – just a mathematician. Well done Sir Mervyn King for doing the sums.”
When the Office for Budget Responsibility published its forecasts with the chancellor’s Autumn Statement in December it didn’t actually admit that the fourth quarter would be negative – but breaking down its figures showed that its prediction for the year worked out only if the economy shrank in the last three months.
And in January 2013 the Office of National Statistics has confirmed what we said half a year ago. The UK economy shrank by 0.3 per cent in the three months to December 2012. That’s a treble dip – though it won’t be a new recession unless the first quarter of 2013 is negative too, and the economy should be recovering mildly by then, despite January’s bad weather.
The 0.3 per cent is only a first estimate of course, but it would require a larger than usual revision to make it positive. The 1.8 per cent fall in production in the final quarter of 2012 is worrying – but so is the lack of growth in services – the thing Britain’s supposed to be good at. The fourth-quarter setback means the economy didn’t grow at all in 2012. The outcome for 2013 has to be better, but the first quarter will struggle to show any advance: the growth will have to come later in the year.