Niesr estimate adds to ‘triple dip’ fears

Britain’s economy contracted in the final quarter of 2012, the National Institute of Economic and Social Research said on Friday, adding to fears that the UK economy could enter a “triple dip” recession.

The economic think-tank said output fell by 0.3 per cent in the three months to December, with the economy shrinking slightly over the course of last month.

“These estimates for the final quarter of the year are distorted due to an artificially high level of output in the third quarter of 2012,” Niesr said. The economy grew by 1 per cent in the third quarter of last year, in part because the positive effects of ticket sales for the Olympic Games were included in the national accounts during this period.

“Removing these distortions [from Olympic ticket sales] suggests an underlying economic performance that is best described as flat,” the think-tank said.

According to the Niesr estimate, the UK economy failed to grow at all during 2012, after expanding almost 1 per cent in 2011.

Contraction in the first quarter of this year as well as the final three months of 2012 would signify a “triple dip” recession for the British economy.

Niesr’s estimate follows the release of a poor set of official figures on Friday morning, which showed manufacturing and construction output contracted in November, raising the prospect that the Office for National Statistics will report an economic contraction when it releases its first estimate of gross domestic product for the fourth quarter on January 25.

Official data showed manufacturing output, which accounts for just over 10 per cent of the economy, fell 0.3 per cent between October and November. Analysts had, on average, expected an increase of 0.5 per cent.

Over the 12 months to November, manufacturing production contracted by more than 2 per cent.

The ONS also reported a smaller than expected rise of 0.3 per cent in industrial production from October to November. Over the past 12 months, this measure suffered a 2.4 per cent decline.

Official figures for the construction industry showed that output fell 9.8 per cent in the 12 months to November.

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