To be fair to the industrial sector, the ONS reckons part of the reason for the drop was the unseasonably warm weather we’ve experienced all the way through this winter, which led to lower energy consumption (particularly when compared with last winter’s arctic conditions). But manufacturing output was also down during November, by 0.2%, which suggests that it wasn’t just energy providers who were left out in the cold.
What’s strange is that, after all the reasonably positive Christmas trading results we’ve seen from retailers (Tesco notwithstanding), it had almost seemed as though, after a difficult 2011, the economy was beginning to pick up again. Last week’s Purchasing Managers’ Index for December, for example, might have shown a contraction – but it was a lot less than the month before.
But what all those impressive results have failed to highlight is that, after things failed to pick up in November, the majority of retailers began the sort of discounting that traditionally takes place after Christmas at the beginning of December, thus driving up year-on-year sales (which were already expected to be better than last year’s figures, after consumers stayed at home during the aforementioned icy weather).
So it’s not really surprising that the likes of Philip Shaw, UK economist at Investec have come out with cheery little soundbites like: ‘we’ve been suggesting that the UK will be in recession at the start of this year, but it may have started even earlier. There isn’t very much that’s performing well in the UK economy’. The question now is whether he’s right, and the UK is already in recession, or whether there’ll be a bit of a wait before the economy is officially in the doldrums again. Either way, hold on tight. It’s going to be a heck of a year.