One of the chief agents of this economic decline was the 1.3% drop in industrial production last year. Manufacturing output slowed by 0.7% and the energy sector suffered from a consumption blip after weeks of mild weather left radiators languishing unused. Construction was also down, with 0.7% fewer projects built; even service sector output dropped 0.1%.
Government spending, household consumption and exports all grew, however. But not enough to turn the tide. The Chancellor’s purse strings were pulled pretty tight, and the increase in household spending came hand-in-hand with a falling savings ratio as people dipped into their nest eggs to get by. Over the year as a whole, household's real disposable incomes fell 1.2%, the largest fall since 1977.
It makes for pretty grim reading, and the situation is unlikely to improve in the first quarter of 2012. Lower inflation will help to boost real incomes this year, but actual wage growth remains weak. The PMI forecast a 0.3% expansion in the three months to March, but that barely covers the lost output in Q4 of last year.
The only number crunchers foreseeing a bright future for the UK economy are the statisticians over at the OBR now. It has predicted a 0.8% economic growth rate for 2012. But that is looking increasingly unlikely as the year goes on…