But before everyone starts beating their breasts in the manner of a tragic Greek chorus, remember that it could be far worse. The UK has been battered by gale-force headwinds including: austerity measures, high inflation, weak pay growth, 8.3% unemployment, the credit crisis, not to mention the turmoil in the eurozone, our nearest and biggest customer. Yet the UK is still meeting its public borrowing targets, the deficit is going down, and business confidence is steadily creeping up.
In fact, today’s ONS announcement has brought some confusion to economists. We’ve had some overwhelmingly positive data coming in over the past month. Retail sales were up 1.8% in the first quarter. Unemployment was down. The PMI surveys have all pointed towards Q1 growth, and robust growth at that – 0.5% over the period, including 15 months of services growth and manufacturing at a 10-month high.
Yet the official data now suggest that services barely managed to grow at all: just 0.1 in Q1. The ONS also states that production fell 0.4% and construction output all but collapsed with a 3.0% drop.
Anyone else getting a sense of déjà vu? Cast your memories back to 2009 when the UK found itself in a similar situation. The PMI surveys all showed the green shoots of growth, signaling an end to recession. Then, suddenly, a 0.4% contraction in GDP was announced. It was a shattering blow to both consumer and business confidence. But the ONS went on to revise that figure to a 0.2% increase just months later.
Charlie Mullins, founder of Pimlico Plumbers, warns business leaders not to be downcast by the bad news: ‘This rear view mirror economics should not sculpt how businesses run their operations,’ he says. ‘We should not get depressed; we’ll just have to do more and work harder.
‘Not many people thought Chelsea FC would overcome the odds to beat Barcelona to reach the Champions League final last night,’ he adds. ‘The business community has to evoke the spirit of Stamford Bridge to make sure that we not only survive, but grow our operations’
Groans all around for non-Chelsea lovers – which means most of us, but the message is clear. This gloomy – and possibly misleading - data should not be allowed to crush business confidence and damage the UK’s economic recovery. If allowed to do so, we could see a real recessionary wolf at the door.