UK GDP data for the third quarter came in much stronger than the market consensus of 0.4%. The actual increase was 0.8%, after a 1.2% gain in Q2. (Kudos to RBS, whose forecasters called it exactly right). So far this year, the economy has been growing at an annual rate of over 3%, above its long term trend.
There's been a small amount of "yes, but" commentary from the media, mostly focusing on the fact that "it's all about construction, which is still recovering from the tough winter". It isn't, though: construction accounted for only one-rhird of the quarterly rise in GDP. Manufacturing and services also performed very respectably.
The more common reaction, however, has been to suggest that the data mean that the economy will avoid the feared "double dip" recession -- a view that's almost as ludicrous as the media's usual doom-and-gloom. Look, children, I'll spell it out for you one more time. Growth will remain positive through the end of the year -- in fact, Q4 could be surprisingly strong, as people try to make big-ticket purchases before VAT goes up in early January. The risk of a double-dip will be strongest in the first couple of quarters of 2011, as the VAT hike takes its toll and spending cuts really start to be felt (as opposed to just being talked about, as they are at the moment).
I'd be a bit surprised if we meet the technical definition of a recession -- two declining quarters in a row -- but early 2011 is when it could happen. All the rhetoric of recent months about an imminent double dip, with The Times at its forefront, has been based on very poor analysis indeed.
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