The UK economy fell back into contraction in Q4 2011 and continued to shrink in Q1 and Q2 of 2012, falling back into recession – defined as two (or more) consecutive quarters when the economy contracts. 2012 has been an extraordinary year for the UK with festivities to mark the Diamond Jubilee of Queen Elizabeth II and the hosting of the Olympic and Paralympic games in London. The Jubilee generated extra public holidays which some analysts suggested may have led to a loss of GDP in the second quarter, but many expected that the economy would see a boost from the Olympic activities from increased tourism and other related activities. Poor weather in Q2 was also linked to the contraction in the economy.
Figures just released from the UK’s Office for National Statistics (ONS) have shown that the UK economy returned to growth in Q3 2012 with the economy growing by 1%. The ONS suggests that ticket sales from the Olympic activities may have boosted the GDP figure by as much as 0.2%. Increased hotel occupancy and tourist expenditure in restaurants and UK commerce will also have helped growth, but these are harder to quantify, according to ONS.
The Q3 figure will be subject to revision as more data becomes available, but the rate of expansion seen in the UK economy, on these figures, is the fastest rate seen since 2007. According to ONS, the economy contracted by 6.4% between the start of 2008 and the end of the second quarter of 2009 and has since recovered about half of the lost output.
Naturally, the British Prime Minister, David Cameron, is hailing the figures as proof that government economic stewardship is working whilst the shadow chancellor finds the same data to be evidence that the economy is “flat-lining” with growth now oly slightly better than in Q3 2011.