Last week's initial GDP reading for the second quarter in the UK came in as a dispiriting -0.7%. This was the worst figure since the first quarter of 2009 and took the overall output numbers to a level some 0.2% below where things were when the coalition came to power. Cue a fresh round of calls on the Chancellor to 'change course' away from austerity measures.
The truth is that we were expecting a poor figure from this quarter. A general lack of productivity thanks to an extra bank holiday and the awful weather has played havoc with initial estimations for growth in 2012 and beyond. The prospect of a further downwards revision is very much a possibility.
However, one thing that is almost guaranteed is that next quarter's figure will be positive. The initial estimate is that the 'bank holiday blitz' in the last quarter caused a dip of about 0.5% and therefore with a full working schedule we should see that figure added on to boost Q3.
Secondly, the main fall in Q2 was as a result of the construction sector dipping by around 5%. While not all of this can be attributed to the weather, there were some site closures through the quarter as a result of the rain. Two of the largest construction projects in Europe (the Olympic Park and The Shard) completed in the past few weeks and therefore there will have been some slip in activity of late.
Consumer spending is more difficult to evaluate. The pressures on the UK consumer remain just short of crushing. For all the falls that we have seen in inflation through 2012, wages are still not able to catch up while looming austerity and the prospect of further job losses means that any money left over at the end of the month is being saved for a rainy day and not spent. Large events like the Olympics can have the effect of dragging demand forward meaning that the public spend what they have at or around an event and then scrimp later on in the year. The prospect of this is very high.
It's clear that the UK would not be 'podium placing' if there were medals awarded for growth at this summer's games; the landscape is anaemic at best. However, there are those of us who are bullish about the positive influence of the Olympics, citing the influx of tourists as a boost to the retail sector. While this weekend in London was busy, I cannot help but think that for every tourist that has come here for the games, there is one who will stay away awaiting a quieter and cheaper time to visit.
As long as they come, that will be fine, but they may wait for Christmas or early next year. In the short term we can count on Olympic ticket sales helping consumption as, although they were mainly sold last year, they will contribute to next quarter's figures.