GDP grew by 0.3% (0.31% before rounding) between the fourth and first quarters versus an above-consensus estimate here of a 0.2% gain – see Friday’s post. As expected, the rise was driven by solid expansion in the dominant services sector (+0.6%), which offset weakness in construction (-2.5%), with little contribution from industrial production (+0.2%).

The 0.3% GDP increase probably understates economic performance because 1) construction output is likely to have been affected by poor weather and 2) the recent pattern has been for initial estimates of the GDP change to be revised up. GDP would have risen by 0.48% if construction output had been stable last quarter, as suggested by a modest recovery in new orders in late 2012. The quarterly GDP change, meanwhile, has been revised up by 0.15% on average since the start of 2009 (i.e. comparing the initial estimate with the latest data vintage). Taking both considerations into account, “true” growth may have been 0.5% or more.

Today’s news should, thankfully, put to rest silly “triple dip” commentary – silly because the fourth-quarter GDP decline was entirely attributable to a reversal of the Olympics boost in the third quarter so clearly did not signal underlying economic contraction.

The focus now is on how much longer the “double dip” of the fourth quarter of 2011 and first quarter of 2012* survives in the official data. The quarterly GDP changes in the two quarters have so far been revised from an initially-reported -0.3% and -0.2% respectively to -0.1% and -0.1%. As previously explained, the double dip has already disappeared in onshore GDP data (i.e. excluding North Sea oil and gas production).

GDP last quarter was still 2.6% below the peak reached in the first quarter of 2008 but the onshore shortfall is significantly smaller, at 1.7%. The latest onshore GDP index estimate, of 104.5*, is 0.4% below the annual maximum of 104.9 reached in 2007. Moderate further growth in the remaining quarters of 2013, in other words, would result in a new annual high this year.

The sectoral detail in today’s report highlights a continuing depression in the (tiny) agricultural sector – output fell by 3.7% last quarter to stand 14.2% below a peak reached in the second quarter of 2008. Upward pressure on food prices may persist.

*GDP also fell in the second quarter of 2012 but this was attributable to an additional bank holiday.
**Based on 2009 = 100.