All eyes on Q4 GDP figures
A TRUER picture of the state of the economy is likely to be revealed today when the latest Q4 GDP figures are announced.
Most analysts are predicting a decline on the artificially-inflated rate present in the Q3 figures, which were skewed because of the Olympic effect.
Falls of as much as 0.5% have been suggested which will do little to allay fears of an unprecedented triple-dip recession – whatever the definition of that is – especially as the weakened euro zone continues to impact on growth prospects in the UK.
The 1% growth in UK GDP in Q3 while welcome was by general consensus misleading. Stripping out the Olympic effect and the recovery from what was a chronic Q2, what growth there was was relatively flat.
With the notable exceptions of the UK automotive and civil aerospace industries, output has been poor and the slowdown in the EU countries has restricted opportunities for UK firms.
If the Q4 figure is weak then the trend for the whole of 2012 is likely to have been one of negative growth in real terms and with predictions of limited growth for the whole of this year then the situation looks far from encouraging.
Contrasts with trading partners and rivals make for difficult comparisons. Since 2008 GDP in the United States and Germany is up by 3% and 2% respectively on the UK. In the emerging economies the figures are even more startling, with Asia up by 33% and China by a staggering 50%.
Exports to these economies must step up if the balance of trade deficit is to show any signs of improvement; while simple economics dictates that businesses should look for growth where the markets are strongest.
With the spotlight heavily focused on manufacturing and retail in recent weeks, one sector which will come under increasing scrutiny will be construction. The sector saw a further decline of 2.5% in Q3 2012, contributing to decline of 10.8% over the last 12 months.
The reduction in construction activity is said to reflect the general lack of confidence by businesses to commit to long-term capital projects, a situation unlikely to change in the short term unless Government-backed infrastructure projects such as HS2 are fast-tracked.
The service sector will also be scrutinised to see if the picture is as rosy now the Olympic bounce has reached its peak.
