Date: 20 Apr 2013, Economics and Finance
Question setter: Mettletest Panel

2013 1st quarter GDP

Will the first estimate of the UK January-March 2013 Gross Domestic Product (GDP), due to be announced on 25th April, show a quarter-on-quarter decline?


Response:


Answer: Yes
Confidence level: 52%
Mean confidence level (all requests): 62.00%

Justification:
The consensus view is for a very slight rise, but my own view is that the cold weather and the Eurozone troubles combined will mean that the figures will fall the wrong side of the line. The government is keen to prevent that because it will make such bad headlines - triple dip recession, the first in recorded history. Rising unemployment indicates that fears will be realised, as it is likely that lay-offs have been the result of an on-going lack of orders. There may be a little growth to come, as the CBI judges from the confidence of its members, but the first quarter will not be part of that. The IMF and the opposition will use any decline to justify a turn to Plan B and the likelihood is that Osbourne will creep that way, while protesting that it is business as usual. He certainly cannot afford for the 2nd quarter to go badly as well. My prediction is for a decline of between 0.1 and 0.3%, followed by government commitments to lower VAT by 2015.

Outcome: No
Score: -52
Mean score (all respondents): 31.00

Expert opinion:


Answer: Yes

Selected Expert Answer from John Karslake:
We could see a dire continuation of the UK recession, marking a sad new historical event. The internal and external headwinds have proved more than the economy could bear if it were going to return to growth. Internally, taxes, especially VAT, are providing a genuine constraint. The rhetoric of austerity has dented confidence, despite maintained government spending levels to date. All commentators have been lowering their GDP estimates for 2013, though many still predict some growth for the first quarter. This will not be realised. Businesses have held back, cautious about the Eurozone, with good reason, but not certain enough about markets further afield to divert their efforts. Households fear for incomes against a background of low wage rises and rising unemployment. Lack of spending incentive has been compounded by the long run of cold weather through the entire three months. All these difficulties are likely to provide a shock on the downside, as we see a repeat of the 0.3% decline in the last quarter of 2012, or worse. Brace yourselves for news that will only please the shadow treasury minister.

Answer: No

Selected Expert Answer from Mettletest Panellist:
Everybody is keen to see whether the UK enters a "triple dip recession" and these first quarter figures have taken on a great significance. Commentators are split on the outcome and relevant economic figures, announced so far, give no definite steer. Retail sales for March, show a decline slightly larger than consensus expectations and employment rates are disappointing. However, one must take heart from the industry insiders, like the CBI, who are predicting growth of 1% for 2013 and 0.3% for the first quarter. Nascent signs of organic growth and more positive business outlooks suggest that the private sector is not terminally depressed. The question remains as to whether there is the flexibility and vision to avoid being dragged down by Eurozone problem, which will continue for some time. UK business will need to be nimble to cope with either the short sharp shock of a Euro break up or the long drawn out decline of a Euro defence. Longer term, the balance sheet strength of many bigger companies could provide the ability to find new methods and markets. I do not expect this to have come through in the first quarter 2013, of course, but I expect the UK to avoid an historic triple by a narrow margin.


Outcome: No

Comment on outcome from Mettletest Panellist:
GDPhew! A 0.3% rise was even better than I expected. These figures are subject to revision, of course but they will provide a much-needed boost to morale. The detail showed that the services sector grew by 0.6% in the quarter, with a strong performance from retail, hotels and restaurants. Perhaps these areas of personal spending are the best indicators of returning confidence and bode well for the future. Transport and communications also made a good contribution with growth of 1.4%.
However, construction activity was really weak and fell 2.5% in the first quarter. Many feared the cold weather would be a major factor contributing to a decline but this was offset because North Sea oil and gas output was raised to meet higher demand. Questions remain on how to fire up construction and manufacturing, still the weak links. We'll watch with interest to see whether these figures are confirmed and whether growth continues into the second quarter.