Growth figures for January

This post is about initial and provisional GDP growth figures. For the avoidance of doubt, it refers to absolute GDP in real terms after adjusting for inflation, not GDP per head.

Initial figures released yesterday suggest that the economy returned to growth in January, and grew by more than it contracted in December.

You can find these initial figures at:

GDP monthly estimate, UK - Office for National Statistics (ons.gov.uk)

The initial figures show that the economy grew in January 2024, with GDP up 0.2 per cent and that our services industry and construction services are growing. 

I was going to call this post "UK economy returns to growth" but actually it should not be taken for granted that the slight negative growth initially reported at the end of last year actually happened. 

As I have explained in previous posts on the dangers of building strong narratives from weak data, which you can find here, here and here, initial GDP growth figures tend to be revised. In the UK they tend to be revised upwards: the average change is an upwards revision of 0.15 percentage points.

The fact that initial growth estimates in the UK have tended to be too low has given rise to a whole series of political narratives which turned out to be based on sand and media reports of recessions which, when the final figures came out a year or two later, had never actually happened.

For example, do you remember all the talk about a supposed "double dip" recession of 2011/2012? It never happened. 

In early 2023 there was another commonly believed and shared narrative based on wrong data: the allegation that Britain was the only country in the G7 whose economy had yet to recover past pre-COVID levels. That was wrong too - and in fact UK growth over the pandemic period was the third fastest in the G7.

The ONS is currently saying that the UK economy shrank by 0.1% in the third quarter of 2023 and by a slightly greater amount, but still within the margin of error, in the final quarter. Because the formal definition of a recession is two consecutive quarters of negative growth, the media reported when those figures came out that the UK was in a "technical recession"

Some people asked at the time what "technical recession" means. My answer is that it appears to mean estimated negative growth based on initial figures which is well within the margin of error for those figures. In this case within the margin of error to such an extent that, if the figures are subsequently adjusted upward by the recent historical average amount, it is entirely possible that we will find that the "technical recession" of the last half of 2023 will be yet another recession that never happened.

It is also possible - although less likely because UK growth figures are more likely to be revised up than down - that the growth in the economy in January may be revised away, because this is also within the margin of error.

Before anyone misinterprets anything in this article as an attack on the ONS statisticians, it is nothing of the kind. They are doing an excellent job with incomplete information and the UK's economic statistics are amount the five most accurate in the world based on the size of revisions. They are also the most cautious, and that isn't a criticism either. We just have to understand the implications when using their data.

But with all those caveats - it does appear that the economy bounced back in January and is growing. We need to stick to the plan and look for ways to ensure it grows faster.