Fortnightly insight into the current state of the economy and how it relates to Dorset by Nigel F Jump, Chief Economist of Strategic Economics Ltd (a Dorset Company) and Visiting Professor in Economics at the Universities of Bath and Plymouth.
See: www.strategiceconomics.co.uk
According to the first ‘guess’ about UK real GDP in the period July to September 2012, as recently released by the Office of National Statistics, the UK economy moved back out of recession in the third quarter (Q3). Technically, this is true, with overall output rising 1% quarter-on-quarter (i.e. on the previous three months – Q2). Remember, however, these numbers will be revised as more hard information becomes available. Just as the original decline for Q2 was lowered over time, the current increase for Q3 may come down a bit before year-end, (as we get more hard evidence about September).
Any growth is welcome, but about two-thirds of the recorded bounce was explained by special factors: Olympics accounting & Jubilee adjustments. These factors will not re-occur in Q4 (October-December). The question then is that, if the 0.3% underlying rate of growth of Q3 is right, will this news on growth boost confidence and fire a slow, but sustained recovery? Or, will activity sink back again through the coming winter?
Another point is that the Q3 rise in real GDP, reflecting the way Olympic ticket sales were accounted for, is mainly a London factor. Most places, including Dorset, saw a very mixed picture. Weymouth and Portland had some positive impact from the sailing events, mainly by attracting visitors who might otherwise never have gone there before, but also had a negative impact by dissuading other visitors. Some local businesses reported lower spending whereas others did quite well. Generally, in Dorset as elsewhere, sales volumes were down as the sporting events encouraged more virtual (television) than real (shop and catering) consumption. Later in the quarter, however, there was a compensatory bounce in some retail areas, particularly clothing. Overall, some localities and sectors may have stayed in recession and many more were essentially flat.
Finally, we need to consider the longer run. Even with the special effects outlined above, real GDP was 0.1% lower in Q3 2012 than a year earlier and the overall level of economic activity is still well below pre-recession levels. Compared with a year earlier, production (including manufacturing) was down 1.2%, construction 10.8% and services grew by only 1.2%. Sad to say, whilst recession may be over, the downturn persists. With domestic and export demand under pressure from falling real incomes, any recovery from here will be long and slow.
Professor Nigel Jump, 1st November 2012
