FactCheck: GDP shock – was it the weather wot done it?
“They are clearly disappointing figures but the statisticians tell us that the weather had a huge effect – we had the coldest December for 100 years, businesses were closed, people couldn’t get to work… So we’re not going to be blown off course by the bad weather.”
George Osborne, Chancellor of the Exchequer, 25 January 2011
Cathy Newman checks it out
David Cameron told us before Christmas that the economy was out of the danger zone.
Not any more it ain’t. We now know the economy shrank by 0.5 per cent at the end of last year – hardly the recovery the prime minister cheerily predicted in December.
Ed Balls pounced on the figures as evidence that Britain’s emergence from recession has come to a juddering halt. He urged theTories to come up with a plan B, and fast.
But the Chancellor blamed the figures on little more than a spot of bad weather. The wrong kind of snow, or at least too much of it.
The weather was indeed pretty extraordinary. But can meteorology explain away all our economic troubles?
George Osborne was right about one thing: it was damn cold in December. The Met Office told FactCheck the average temperature in the UK that month was -1C, and that trumps the previous record of 0.1C in December 1981.
But we all knew it was cold, so why did the figures come as such a surprise and how much of a difference did it really make?
The Federation of Small Businesses (FSB) did a snap poll this month and found that the weather did hurt small businesses: 30 per cent said half their staff took at least one day off work, and 24 per cent said they had to close for up to five days.
But the FSB found that businesses were far more worried about the economic impact of the rising taxes. 39 per cent of small businesses said the hike in fuel duty will have a ‘significant impact’ in them; 27 per cent thought VAT would do they same. That compares to 24 per cent who said snow had had a similar impact.
And the Office for National Statistics seemed to echo that – saying today while GDP was “clearly affected” by the weather in December, if you strip out its impact “GDP would be showing a flattish picture rather than declining by 0.5 per cent”.
Beyond businesses closing and people not being able to get to work, you might expect the retail sector to take a hit during the snow.
But in fact retail sales (which account for 5.4 per cent of Britain’s GDP) actually increased by 1.5 per cent in December 2010 – although much less than the 6 per cent increase in December 2009.
The British Retail Consortium said that big ticket buys were hit largely by concerns about inflation, and fears over jobs and income.
One of the sectors worst affected was services, which suffered a 0.5 per cent drop. Not good news, as the service sector accounts for 74 per cent of the economy. There was also a collapse in construction, with a contraction of 3.3 per cent.
So, the weather is by no means the whole story.
It’s also worth pointing out that these stats are just preliminary estimates, so the ONS hasn’t really been able to measure the impact of the snow.
It’s only had 40 per cent of data from the last 3 months – and most of that is from the earlier months of October and November. The rest is an estimate.
Cathy Newman’s verdict
It seems the Chancellor’s claim – repeated ad infinitum in interviews today (16 times in one interview) - that the snow shrank the economy should be taken with a pinch of salt (if indeed there’s any left after the big freeze).
While there’s little doubt the weather was the last thing Britain plc needed, clear skies wouldn’t have given us the economic rebound we were promised by the prime minister.
That’s allowed Labour to forecast a gathering storm – namely that the austerity measures are stifling the recovery.
If the opposition is right and the government’s wrong, watch out for the chancellor blaming leaves on the line for derailing the British economy.