The reported 0.3% decline in fourth-quarter GDP rests on an official guess that construction output slumped in December. Even if the number stands, however, it suggests underlying growth in the economy last quarter, allowing for drags from the unwind of the Olympics ticket sales boost and lower North Sea output. The best “clean” comparison is between the levels of non-oil GDP in the first and fourth quarters – there was a rise of 0.5%, indicating a continuing, if weak, recovery.

A post on 11 January stated that the production data then in hand – for October and November for industry and construction and October only for services – were consistent with a 0.1% rise in fourth-quarter GDP. So what went wrong? The assumption in the post that industrial and services output would remain stable for the balance of the quarter proved correct, taking the two sectors together. The forecast miss, instead, reflected an estimated 16.0% plunge in construction output in December – this wiped out strength in October / November to leave the quarterly total only 0.3% above a very weak third quarter.

It is important to realise that the December construction output figure is little more than a guess based on early responses to the monthly business survey and a judgemental fudge factor. It is certain to be revised significantly, though not necessarily upwards. A strong case can be made that the Office for National Statistics should eschew this sort of guess-work and either extrapolate data for the first two months to derive a quarterly estimate or, preferably, delay publication of the highly-sensitive preliminary GDP report until the second month of the subsequent quarter when more reliable information is available.

Even assuming that today’s weak number is confirmed, however, it does not imply that the onshore economy contracted in late 2012, because the quarterly GDP change was depressed by at least 0.2 percentage points by an unwind of the Olympics boost and a further 0.2 from a decline in North Sea oil and gas extraction. Adjusted for the Olympics, in other words, non-oil GDP rose by about 0.1%.

The strong third-quarter GDP rise reflected a bounce-back from a second quarter depressed by an additional bank holiday as well as the Olympics boost. The last quarter unaffected by such distortions was the first quarter of 2012. Non-oil GDP rose by 0.5% between the first and fourth quarters – weak but a much better performance than in the Eurozone, where GDP is likely to have contracted by at least 0.5% over the same period.

Will today’s number prompt further MPC easing at its February meeting? A key consideration is that output sluggishness coupled with an apparent solid rise in aggregate hours worked last quarter (based on data through November) suggest ongoing weak productivity performance, offsetting an "output gap" argument for more stimulus. The “MPC-ometer” model followed here rates the probability of further action in February at less than 50% even incorporating today’s news; the final reading will depend importantly on January purchasing managers’ surveys released at the start of the month.