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Saturday, April 25, 2009

A dose of reality about those Q1 GDP statistics

This piece in the FT today (first paragraph below) injects some reality into the reaction post the Q1 GDP data out yesterday. The data formed a first estimate of growth in the UK economy for the first quarter of this year. The national statisticians estimated GDP fell 1.9% in real terms, equating to a year on year decline of 4.1%.
Weak data dash Darling’s predictions
By Chris Giles in Washington

Coming just days after Alistair Darling delivered one of the bleakest Budgets in Britain’s history, the news that the economy shrank by 1.9 per cent in the first quarter thickened the storm clouds gathering over the chancellor. / UK / Economy & Trade - Weak data dash Darling’s predictions

In fact, estimates are often revised as this article notes. And because we are talking about Q1 09, there will be little if any impact on estimates for tax revenue since those relate to the new tax year (April to March).

The politics of this week have been dominated by grim headlines and a general and pervading air of pessimism. That is not to say that the outlook is not incredibly challenging, just that there is a big difference between an economic forecast and reality and the reality is we don't actually know what is going to happen.

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