A double-dip recession moved a big step closer with news the UK economy contracted by 0.5% in the last quarter of 2010. Indeed, we may already be in recession - defined as two consecutive quarters of falling GDP.
No one foresaw the contraction. The most pessimistic view was that the economy had reached a "virtual standstill" represented by 0.2% growth in the last quarter. A majority of economists assumed a higher growth rate.
The snow immediately before Christmas and the coldest December in a century will undoubtedly have been factors. But these do not adequately explain the decline. Government's figures show disturbing quarterly declines in construction (-3.3%) and business services and finance (-0.7%). The latter will not have been unduly affected by snow, while the construction sector is frequently a bellwether for the economy as a whole.
Output across services and in the distribution, hotels and restaurants sector fell by 0.5%, while in transport, storage and communications output fell by 0.8%. Of course, snow could be a factor here, but growth must have been pretty lousy before December's bad weather to drag the quarterly figures so low.
Manufacturing produced the best figures, up 1.4% in the three months. The problem is that manufacturing companies would have been anticipating Christmas sales and would, in any case, be likely to slow down only if managements felt the economy was slowing. No one told them. The figures for manufacturing output this quarter will be interesting.
Add in the latest inflation figure - 3.7% or 4.8% depending on the measure you take - unemployment at 2.5 million and the bulk of public-spending cuts still to come, and the news on the economy is far from good.
A monthly survey by economic consultancy Markit suggests one in three UK households are suffering falling income and "running just to stand still".
It would be a shame if this takes the shine off the bright start to the year for travel - with retailers recording their best January since the financial meltdown of 2008 and analyst GfK Ascent reporting season-to-date sales for summer 2011 up 5% year on year up to last Saturday. But the contractions in GDP and income must have an impact. The question will be how far the pain extends, and for how long.
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If we are honest the weather had a lot to do with it, I know from experance that I just did not go out and buy things during that time but made do. In the shop we felt it to but january has been a lot better than expected. Also speaking to people in local building business they basicly wrote off 2 weeks, during which they cut staff hours, did not employ contractors and did not purchase supplies all due to weather.
If you look at what did grow you can see it parts of the economy that would not be so hard hit by the weather. A bit of a shock yes.. long term I think it is down to the media if they talk it down most likely that will cause it to happen
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