UK Economy Double Dips For First Time Since 1970s

Tyler Durden's picture


For anyone who may have been concerned that the BOE was serious in its recent "admission" that it just may not ease further, or engage in more QE for that matter, we have good news: the UK economy just double dipped for only the first time since the 1970s, following a stunning Q1 GDP release which came in far weaker than expected at -0.2% while the consensus was looking for a 0.1% rise. In other words, the UK has just followed such other pristine example of economic success as Spain and Greece into double dipping. Bloomberg economist Niraj Shah brings even more bad, pardon good, news: 2Q GDP may also contract as a result of additional bank holiday in June. Construction output knocked 0.2 ppt off of quarterly GDP growth. Per Shah, the BOE may point to drop in construction as a possible aberration in data, concerns will remain over the strength of the service sector as output there rose only 0.1% Q/Q. The U.K. has contracted 9 quarters since first falling into recession in 2Q 2008. All in all this is great news for those desperate for bad news and explains why futures, and the EURUSD are spiking.

Goldman's take, which naturally tries to put the data in a favorable light:

BOTTOM LINE: The ONS’s Preliminary Estimate indicates a 0.2%qoq decline in Q1 GDP, implying that the UK has returned to recession. The data is difficult to reconcile with other indicators of activity – our UK Current Activity Indicator, for instance, is consistent with +0.3%qoq (+1.2%qoq annl.) growth in Q1 – and the MPC has suggested that the recent weakness of official data is “perplexing”. In time, we expect the data to be revised significantly higher.

1. GDP was dragged down by a 3.0%qoq (12.6%qoq annl.) contraction in construction and, excluding this sector, output would have been broadly flat (Table 1). However, reflecting the weakness of the ONS’s monthly data for this sector, that decline had been widely anticipated. The main surprise in today’s release is that the weakness in construction was not offset by a gain in services output: the ONS’s monthly data for services – which had been available only until January – suggested that services output would register a substantial gain. However, according to the ONS’s first full-quarter estimate, output in this sector rose by only +0.1%qoq in Q1.

2. The data is difficult to reconcile with other indicators of activity: our UK CAI is consistent with +0.3%qoq (+1.2%qoq annl.) activity growth across Q1 as a whole, and reached a level consistent with +1.6%qoq annl. growth in March. The PMIs, meanwhile, are consistent with GDP growth of +2.0-2.5%qoq annualised.

3. Some readers may recall that there was a similar discrepancy between official data and survey data in the second half of 2009. The ONS’s Preliminary GDP Estimate for 2009Q3 implied that output had fallen by 0.4%qoq, a release that we described at that time as “unbelievable”. Following a series of significant upward revisions, the GDP data for 2009Q3 now indicates that output rose by +0.2%qoq. More generally, where there is a discrepancy between business surveys and the ONS’s early GDP estimates, we find that business surveys typically provide a more accurate guide to 'post-revision' GDP data. Faced with a similar discrepancy between surveys and the ONS’s Preliminary Estimate, we view today’s data as similarly unbelievable.

4. Ahead of the Q1 release, the Bank of England’s MPC has also been largely dismissive of the weakness of official data, describing the sharp fall registered by the latest official construction data as “perplexing”. The committee places significantly more faith in the improvement registered in Q1 by business surveys (and in their own Bank of England Agents’ Reports). In their view, “underlying aggregate activity growth was have picked up since the second half of 2011”, despite the possibility that the ONS could “report further falls in GDP in both the first and second quarters”.

5. Nevertheless, today’s data has significance in shaping financial market perceptions (note that the big revisions to GDP data typically take place 2-3 years after the initial release, by which stage the market’s focus has long since moved on). As the MPC also noted in the April Minutes, it is possible that the weakness of official GDP data “might further damage household and business confidence, even if the underlying pace of economic expansion were stronger.”

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Wed, 04/25/2012 - 07:04 | 2372728 pufferfish
pufferfish's picture

That with the coming downgrade. Oh dear.


Has anyone got the debt to GDP graph?

Wed, 04/25/2012 - 08:12 | 2372838 tooktheredpill
tooktheredpill's picture

nah SnP said all was cool. Wonder what Egans said...

I remember back in early 2010 an ex bond trader saying he expected a British double dip as they took a relatively long time to reduce interest rates in the face of the credit crunch.

I also don't understand the construction numbers. there are cranes everywhere now in London where there were almost none 2 years back. Does that mean a massive contraction in the country?

Wed, 04/25/2012 - 08:47 | 2372904 Rip van Wrinkle
Rip van Wrinkle's picture

Ever been outside London or even the M25? You may find there's another country out there.

Wed, 04/25/2012 - 07:06 | 2372732 Bobbyrib
Bobbyrib's picture

Anyone who has ever eaten chips before knows double dipping is not cool.

Wed, 04/25/2012 - 07:08 | 2372737 Seorse Gorog fr...
Seorse Gorog from that Quantum Entanglement Fund. alright_.-'s picture

And if you don't know what a double dip looks like, this is what a double dip looks like...

Wed, 04/25/2012 - 07:14 | 2372748 Bobbyrib
Bobbyrib's picture

Good find.

Wed, 04/25/2012 - 07:32 | 2372785 francis_sawyer
francis_sawyer's picture

Just take one dip & END IT!

Wed, 04/25/2012 - 09:00 | 2372941 Taterboy
Taterboy's picture

I see double dipping all the time on Dancing With The Stars! So three 10's for Great Britian.

Wed, 04/25/2012 - 07:07 | 2372734 Cdad
Cdad's picture

In time, we expect the data to be revised significantly higher.

...but in the meantime, the full court press for more free money [to plug the hole left by fleeing investors] will continue apace.  

Wed, 04/25/2012 - 07:08 | 2372736 Sudden Debt
Sudden Debt's picture

Never a mention about inflation which should be subtracted from growth. So this picture is way worse.


Wed, 04/25/2012 - 07:13 | 2372747 EscapeKey
EscapeKey's picture

It already is, if you look at real (rather than nominal) GDP. Figures quoted generally are real.

For the record, I believe what you talk about is commonly called the GDP deflator.

Wed, 04/25/2012 - 17:00 | 2374904 DrunkenMonkey
DrunkenMonkey's picture

And how ridiculous is the figure of 2.69 they used ? With portions being reduced in everything from beans to washing powder and prices still going up, even double that figure is a major understatement.

Wed, 04/25/2012 - 07:20 | 2372759 disabledvet
disabledvet's picture

Odd that the Pound has been surging all year. "Where the Pound go the dollar follows" as they say. We did have a British Invasion here in the States. Back in the 60's--
seems far from threatening. what's the problem?

Wed, 04/25/2012 - 08:32 | 2372877 Sandmann
Sandmann's picture

When money leaves Greece and Italy and Spain it needs those anonymous pools of offshore Banking in which London excels

Wed, 04/25/2012 - 08:31 | 2372876 Sandmann
Sandmann's picture

Inflation is the basis of UK Growth - credit-fuelled and debt-enhanced consumerism to replace real jobs paying real wages

Wed, 04/25/2012 - 07:10 | 2372739 qussl3
qussl3's picture

This with the increased Olympic spend... yowzers.


Wed, 04/25/2012 - 07:39 | 2372793 supafuckinmingster
supafuckinmingster's picture

Greece II, even Greecier!!

Wed, 04/25/2012 - 07:11 | 2372740 EscapeKey
EscapeKey's picture

3...2...1... aaaand Labour complains that we would have evaded this double dip, had public sector spending increased at an even faster rate.

Of course, that they took it from 35% to 53% of GDP in 12 years is completely lost on them. I guess no state spending figure is high enough for socialists.

Wed, 04/25/2012 - 07:17 | 2372754 Quintus
Quintus's picture

Well, if 35% is good and 53% is better then *obviously* 100% must be best.

Wed, 04/25/2012 - 07:22 | 2372761 EscapeKey
EscapeKey's picture

Well, as if by magic, the 35% figure was accompanied by a 3% budget surplus, and the 53% by a 13% deficit.

It's almost as if those numbers are somehow connected.

Wed, 04/25/2012 - 08:57 | 2372932 Rip van Wrinkle
Rip van Wrinkle's picture

Don't give these f*ckers ideas, please.

Wed, 04/25/2012 - 09:59 | 2373175 Coldfire
Coldfire's picture

Please. Why limit it to 100%? And with Keynesian deficit spending, you don't have to.

Wed, 04/25/2012 - 07:42 | 2372798 Dr. Engali
Dr. Engali's picture

You sound like Krugman.

Wed, 04/25/2012 - 07:45 | 2372805 EscapeKey
EscapeKey's picture

I what???

I advocate almost the polar opposite to what that shill posts in his blatant paid-for propaganda pieces.

Wed, 04/25/2012 - 07:11 | 2372741 LongSoupLine
LongSoupLine's picture

Wow, look at the markets and futures cras...


oh wait, I forgot that AAPL is the "market".

Wed, 04/25/2012 - 07:11 | 2372742 Rubicon
Rubicon's picture

Rock on!

Wed, 04/25/2012 - 07:12 | 2372744 q99x2
q99x2's picture

They are closest to the only terrestrial black hole--the City of London--a viperous nest of banksters and other vermin.

Wed, 04/25/2012 - 07:12 | 2372746 evolutionx
evolutionx's picture

BANKD CDS: the heat is on


Intersting rare  overview about Bank CDS


both european and US

Wed, 04/25/2012 - 07:21 | 2372760 lolmao500
lolmao500's picture

Will the UK get downgraded to JUNK already?? It's the most overleveraged and indebted country in the world. Not to mention, home to a shitload of CDS and Derivatives.

Wed, 04/25/2012 - 08:04 | 2372773 GeneMarchbanks
GeneMarchbanks's picture

Can't happen, they'll just step up the media coverage on Spain via Bbc plus dispose financial knee-caping goons to send a message.

Wed, 04/25/2012 - 08:59 | 2372935 Rip van Wrinkle
Rip van Wrinkle's picture

The BBC IS the mouthpiece of the socialist state. This will be news on BBC morning, noon and night for the next 3 months.

Wed, 04/25/2012 - 08:30 | 2372870 Sandmann
Sandmann's picture

Now that NOKIA has been downgraded to junk status Britain cannot be far behind....

Wed, 04/25/2012 - 07:24 | 2372765 Silverhog
Silverhog's picture

They need to smarten up and fudge a recovery like here in Obuma land.

Wed, 04/25/2012 - 07:25 | 2372767 Dick Darlington
Dick Darlington's picture

Take a look at this chart comparing the past and the present recessions in UK.

Wed, 04/25/2012 - 07:26 | 2372768 LongSoupLine
LongSoupLine's picture



but don't worry, their govt is growing QoQ (just like their former colony over the pond) with top minds and solutions to fix it all.

Wed, 04/25/2012 - 07:42 | 2372797 writingsonthewall
writingsonthewall's picture



This phrase is merely a MSM coined one to describe the true events (without letting on what they actually are)



However phrases like that would disclose the inevitability of it all (and discredit politicians and central banks who promise otherwise)

Cue the 'shocked' faces of the UK Government as they pretend to be surprised at this news.


I would emmigrate - but the rest of the world is as fucking stupid as the dimwit wankers over here!


This is merely 1930's all over again - except with the money printing. This means the depression will be prolonged until a war is started.


Jesus - I'm growing tired of predicting this shit and then having to watch as aresholes insist that "down is up and you're wrong"


Fucking retards.

Wed, 04/25/2012 - 08:23 | 2372855 doggings
doggings's picture

Jesus - I'm growing tired of predicting this shit and then having to watch as aresholes insist that "down is up and you're wrong"

lol, you sound like me, except we disagree about the whole emigration thing - it's past tense for me now. 


Wed, 04/25/2012 - 08:25 | 2372864 Acet
Acet's picture

Actually the seriously retarded neo-keynesian, I-need-to-protect-my-future-sinecure-in-finance assholes that pass for financial authorities and politicians around here did most of the damage themselves by running far too  loose economic and regulatory policies for far too long and keep doing it now by persisting with money printing and pressure for further consumer indebtness to preserve the status quo.

Frankly, as a Portuguese myself, I find the UK to be a very corrupt place, in the "I'll take care of you now, you take care of me later" fashion.

Wed, 04/25/2012 - 08:29 | 2372869 Sandmann
Sandmann's picture

Hard to disagree really. The whole system is run for the benefit of a Self-Perpetuating Clique  - almost like Putin's Siloviki

Wed, 04/25/2012 - 10:16 | 2373251 Oxygen
Oxygen's picture

Lol ! It look like it's me who write this comment!

I think exactly the same as you, and im fucking

tired to be [Wrong]!

When do you think the war will begin ? and who first ?


Wed, 04/25/2012 - 07:50 | 2372807 virgilcaine
virgilcaine's picture

They are all chained to each other about to go over the cliff, together at last. The silly Brits think they aren't part of the EU.

Wed, 04/25/2012 - 08:00 | 2372827 giggler123
giggler123's picture

Dam, I was gonna celebrate the positive no recession news with tea tonight by buying a bag of chips, yet now I feel I can't add to our beloved economy so will settle for a toast sandwich.

Wed, 04/25/2012 - 08:26 | 2372865 Sandmann
Sandmann's picture

Adam Smith, Special Adviser to Culture Secretary Jeremy Hunt resigned you think he has been advising Osborne ?

Wed, 04/25/2012 - 08:27 | 2372866 youngman
youngman's picture

And they are the guys with the "strong" currency.....lets see...recession makes your currency stronger.....go figure

Wed, 04/25/2012 - 08:49 | 2372906 virgilcaine
virgilcaine's picture

Hurry and buy an ipad brits. .. get with the program ! An economy can't survive on tourism/binge drinking alone.

Wed, 04/25/2012 - 09:30 | 2373043 Scalaris
Scalaris's picture

Who could've have foreseen any repercussions from the extraction of the consumer's purchasing power, in a consumer-based economy?

Not me.

Wed, 04/25/2012 - 09:35 | 2373051 SoNH80
SoNH80's picture

At least the Brits enjoyed their top-shelf music and literature produced during their last double-dip period.  Now they have to make do with 'Girls Aloud' and 'Bridget Jones' swill....

Wed, 04/25/2012 - 09:49 | 2373134 vote_libertaria...
vote_libertarian_party's picture

Don't worry iToys has an app for that.

Wed, 04/25/2012 - 09:54 | 2373157 jmcadg
jmcadg's picture

The UK has been fucked for ages. We've been holding on by our finger nails for a few years now.

When we finally can't lie about over inflated house prices (which is all our economy is based on), watch the bloodbath.

I am convinced the 'slip' about oil strikes in the UK was a rouse to boost the figures ... look at them. Go figure.

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