Are we really in a double-dip?

The OECD say Britain is back in recession. Photo: PA Wire

Britain is back in recession, scream the headlines, it’s the dreaded double-dip.

At least, according to the OECD, an international club of rich nations (including the UK).

The OECD is a well respected organisation and the estimates for economic growth it published today should be taken seriously.

But they may be premature.

Chancellor George Osborne takes a more sanguine view, pointing out that the independent Office for Budgetary Responsibility (OBR) is expecting 0.3 per cent growth in the first three months of this year.

In fact, I’ve been calling around a number of economists in the City and all of them think the OECD is too pessimistic.

The consensus (an average of City economists’ own forecasts) is bang in line with the OBR.

The Office for Budgetary responsibility is expecting 0.3% growth for the first three months of the year Credit: Reuters

So why the difference?

It may be because the OECD estimate was made before recent, more positive data emerged.

Today, for example the we learned the service sector (shops, banks, hotels and so on), which makes up about three quarters of the economy, grew 0.2 per cent in January, a modest start to the year but one which makes a contraction unlikely.

Still, as Ian Stewart, chief economist at Deloitte, says:

“the detail of what happens in the first quarter is less important than the path of growth over the whole year. […] With more public spending cuts to come and a financial system that’s not working properly the recovery may be … slow, erratic and bumpy.”

– Ian Stewart, chief economist, Deloitte