The ONS National Accounts data released last week contained a number of significant revisions, the most politically significant being that the double-dip recession last year never occurred. The economy showed zero growth in Q1 2012, on the latest estimates, as opposed to negative growth.
Many economics commentators – including Cebr – argued that initial estimates showing a contraction in GDP at the start of 2012 looked strange and at odds with leading indicators and business surveys. In particular, declines in construction output reported for the first quarter seemed excessive and out of kilter with surveys and other unofficial data sources. The ONS now seems to have caught up with these sources.
Revising away the double dip recession makes little difference economically, but the Chancellor will almost certainly seize on this to bolster his economic credibility, especially after this was dented by other ONS revisions recently. Public finances data was revised to show that public borrowing in 2012/13 was higher than in the previous year.
If the Chancellor does take political advantage of the “recession that never was”, he could however find himself countered with some other revisions. The ONS now believes that the recession in 2008 was deeper than previously estimated, such that GDP on that latest data is now 3.9% below its pre-crisis peak, rather than 2.6% below the peak.
Scott Corfe, Senior Economist at Cebr, said, “the latest data make very little difference economically but are likely to be seized upon by politicians. The Chancellor will point to the recession that never was. But the Opposition will argue that the economy is even further away from its pre-crisis peak than previously estimated.”