A shrinking economy but too soon to say the 'R' word

Government investment will take years to work through, and they manage to hit every banana skin, writes James Moore. The good news? We're a way off from the dreaded recession

- James Moore

Instead of growing by 0.2 per cent, as optimistically forecast by the City and the Bank of England, the UK economy shrunk by 0.1 per cent in October for the second month running.

Manufacturing was hit the hardest, with a 0.6 per cent contraction recorded, but construction also fell while the dominant services sector flatlined.

The picture looks marginally better over the past three months; the economy expanded by 0.1 per cent over the longer period. And remember, you have to have two consecutive quarters in the red to qualify as a recession – we’re not there yet by any means. But that’s of little consolation, particularly when compared to earlier in the year, when the picture was considerably brighter.

Some of this can clearly be put down to pre-Budget nerves. The natural response of businesses to the run of stories warning of a tax-raising event was to sit on their hands, holding back on decisions involving spending money until they could properly assess its impact. But that was factored into the expectations.