The Office for National Statistics (ONS) has confirmed its initial GDP estimate of last month, saying that the boost provided by the Olympics helped household spending to rise by 0.6% between July and September. That’s the fastest increase in spending in more than two years, and it helped the economy expand by 1%. This comes as good news: there were rumblings in the City that the initial estimate would be cut to 0.9%.
This all generates some healthy headlines for finance minister George Osborne a week ahead of his Autumn Statement: it’s the fastest rate of quarterly growth in five years, and marks the end of the longest double-dip recession since the 1950s. The output from the service sector rose 1.3%, its largest rise in five years – and very eye-catching when it’s a sector that makes up more than three quarters of GDP. There was also a 3.7% increase in investment spending.
Still, it’s not all as great as it looks. These figures are flattered by their comparison to the previous three months, where output fell thanks to the extra bank holiday to celebrate the Queen's Diamond Jubilee. Meanwhile the ONS said the economy was still 0.1% smaller at the end of the third quarter than it was a year earlier, and shrank by 3.1% from its pre-recession peak in early 2008.
Plus it’s hard to escape the fact that all this Olympic energy is more Usain Bolt than Mo Farrer: the economic outlook starts to look a lot worse once we turn the corner into Q4. By which time such economic cheer may well be like the Games themselves – just a distant memory echoing round dormant East London sports stadia.
That’s certainly the view of Sir Mervyn King, the outgoing governor of the Bank of England, who this month warned of a difficult fourth-quarter, stripped of the one-off boosts of the summer. The Bank’s monetary policy committee has said it’s braced for a contraction, meanwhile the OECD has slashed its UK growth forecasts and warned that unemployment will rise again in Britain next year. And the ONS says retail sales – a gauge of vital consumer spending – posted a surprise drop in October. Compared to a year ago, output was 0.1% lower.
So the dreaded triple dip recession may yet be on its way. The good news? It hasn’t happened yet – and much like the predicted summer shutdown of London, where the city was apparently bound to collapse under the burden of the Olympic influx, it may not come at all…