The ONS estimates for GDP growth came as something of a surprise for the final quarter of 2010 with q on q growth down by 0.5%. Even more disturbing was the sight of the Chancellor of the Exchequer explaining how snow had derailed the economic recovery in the final month of the year. The wrong kind of snow at the wrong time of year.
Manufacturing and construction avoided the snowfalls but business services, transport, storage, communication, distribution, hotels and restaurants were badly hit. The year on year growth was just 1.7% but adjusted for the “snow effect”, growth was a respectable 2.2%.
Preliminary estimates from NIESR, the National Institute of Economic and Social Research projected growth to be 2.7% in the final quarter of the year. NIESR has a pretty good forecasting performance in this area with strong correlation with the prior quarter results.
The out turn was well below consensus estimates and well below our own expectations.
The release yesterday, provides preliminary estimates subject to revision. At worst the provisional figure is a blip in the recovery process, at best a low opening shot subject to upward revision. The seasonal adjustments for manufacturing and construction have a long history of short time working in the final month of the year, which is embedded into the models.
The sectors most badly hit by the snow, have no such history. Expect a significant upside adjustment to follow. JKA
Sign up today and "subscribe" for e-mail notification of updates.
The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.