Back in Recession

I'll excuse all my econ101b students for perhaps not being up at this hour, but 14 minutes ago the Office for National Statistics announced that the UK shrank by 0.2% in 2012Q1, following on from the fall in 2011Q4, which means that officially, the UK is in recession - again.

The Twittersphere is, of course, awash with response.  I had searched for UK GDP and was getting more than 20 new tweets appearing per second:

Does it really matter though? What exactly is this? Recall GDP is the value of final goods produced in the UK over a particular time period - here the first three months of 2012.

The ONS has released information based on 40% of its full data for the UK for the first three months of the year - so it's possible that later the number will be revised as the remaining 60% of the data is used to calculate more precisely how much was produced in the UK over the last three months.

The important thing however is not to jump on these figures, as many will in the Twittersphere, and draw premature conclusions. Yes, the Coalition did embark on austerity, and many did warn a recession may be the consequence (I warned of it but didn't actually think it would happen because so many unexpected events happen). However, many other things are happening - austerity elsewhere, the eurozone crisis, and we as consumers may well have changed unrecognisably over the last few years in response to the crisis.

It is possible that this number will eventually be revised so substantially that it's positive - either way however, what it reveals however is a generally rather bleak picture of economic activity in the UK; as Chris Dillow (@CJFDillow) tweets:

Obsession with small drop in GDP is statistical fetishism. Even if GDP had grown 0.2% in Q1, it would still have been a poor performance.

 There will be plenty of comment on this over the coming days; if you are preparing for the econ101 exam, be careful how you make use of it! Stick to reputable journalistic sources rather than bloggers - FT, Economist, perhaps the Guardian and the Telegraph at a stretch.