Hopes were high early this week that revised figures for the third quarter would show that growth had flatlined, or even risen. But the new GDP figure was a disappointing -0.2%, compared to a previous estimate of -0.3%. Downward revisions in industrial and services output offset improvements in business investment and construction. New figures also show that we are officially stuck in the worst recession since the war: GDP has fallen by a total of just over 6%.
We should return to growth this quarter, according to recent surveys, but the recovery is set to be "fragile and protracted", said John Cridland, deputy-director of the Confederation of British Industry. "There is no sign of a clear driver of strong economic growth." The three key headwinds are tight credit, as "banks nurse themselves back to health"; indebted consumers having to rebuild their savings; and the fiscal squeeze that will hit the public sector.
It's certainly "difficult to imagine too many consumers going on a spending spree", said David Prosser in The Independent. So, however they fare over Christmas, retailers "should be nervous about 2010". Wage restraint in both the public and private sector is "certain" to continue, tax rises are due in April, council tax and energy bill increases are in the pipeline, and unemployment may have further to rise.
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Last week's fall in the claimant count was encouraging, but there are likely to be "big job cuts" in the public sector ahead, said David Wighton in The Times. Moreover, much of the strain on the labour market has been absorbed by temporary fixes, such as reduced hours and wage cuts. So the worry is that if the economy doesn't improve rapidly, employers who have been hanging on to staff in the hope of better times may be forced to let them go. With "an awful lot to contend with", said Capital Economics, Britain is only likely to grow by a "modest" 1% next year.
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