Did we or didn't we? New data throws double dip into doubt

A revision by the Office for National Statistics to construction data has cast doubt on whether the UK really did enter a double dip recession last year.

by Elizabeth Anderson
Last Updated: 27 Jun 2013
The UK economy contracted in the first quarter of 2012, marking two consecutive quarters of negative growth, and had therefore entered a double dip recession. Or so we thought.

Revised construction data has now emerged which suggests the economy flatlined in the first three months of last year, meaning Britain didn't enter a double dip recession at all.

The Office for National Statistics estimates the construction industry did shrink in the first quarter of 2012, but less than previously thought. The revised figures show the construction sector contracted by 5% in the first three months of 2012, not the 5.4% initially reported.

The subsequent boost to GDP means the UK may narrowly avoided falling into recession for a second time. It would mean the UK economy registered zero growth, rather than a contraction of 0.1% (providing other economic figures remain unchanged).

Of course, 0.1% either way doesn't ideally make much difference. But the update will come as a relief to Chancellor George Osborne, whose economic plan has been the cause of much controversy. Last month the International Monetary Fund cut its growth forecasts for the UK and urged Osborne to reconsider the pace of his austerity programme. And just a few weeks ago there was concern that Britain could enter an unprecedented triple-dip recession.

But the ONS update is still only an estimate at this stage, and we won't get official confirmation until June. It is also worth pointing out that the ONS could revise other parts of the economic data, which may offset any of the gains made in construction. Complicated, isn't it?

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