It is far too easy to blame ‘special events’ for curbing growth. The reality is already biting

SO, WHO is to blame for the dismal economic performance that saw gross domestic product in the UK advance by a miserly 0.2 per cent in the three months to end June?

Is it William and Kate, whose marriage may have spurred the sale of barbecues and bunting but which kept most of the nation away from work for a day? Or is it the economic aftershock of the Japanese earthquake and tsunami, which disrupted supply systems around the world and hit production at UK car plants?

Perhaps it was the sweltering weather in April which saw us switch off our heating earlier than usual. And the scramble to buy tickets for the 2012 Olympics – if we hadn’t splashed out, perhaps we’d have spent more in shops and restaurants.

That’s a long list of excuses, all of which were trotted out by government statisticians at the Office for National Statistics as a way of explaining the lacklustre GDP data. Had it not been for what the office’s chief economist Joe Grice dubbed these “special events”, then growth might have been as high as 0.7 per cent.

City economists for once got their forecasts right, after a series of spectacularly bad calls on GDP in recent quarters.

The consensus figure was exactly +0.2 per cent, although the range ran all the way from -0.3 per cent to +0.7 per cent. Even so, they were not wholly convinced by the “special events” scenario, which in some quarters was greeted with incredulity if not derision.

There was a fair bit of derision, too, for George Osborne’s triumphant response to the data which, after all, show Britain’s economy has effectively flat-lined over the past nine months.

In the first quarter of this year, growth was 0.5 per cent but that followed a shock 0.5 per cent decline in the final quarter of 2010. Both those quarters were also hit by “special events” in the form of heavy snowfalls. Year on year, the increase in GDP is just 0.7 per cent.

Yet Osborne greeted the anaemic 0.2 per cent advance with a triumphant declaration Britain was “a safe haven” in a storm of “international instability”. To abandon his austerity package of spending cuts and tax rises would risk jobs and growth, he maintained.

Shadow chancellor Ed Balls also went with a weather metaphor – scathingly he accused Osborne of ripping the foundations out of his own house in the face of a global hurricane. The “breathtakingly complacent” chancellor was, he said, “in denial” and had “recklessly choked off the recovery”.

Of course it could have been worse – and there was widespread relief that at least there was a plus sign in front of the figure.

The usual astute management of expectations by the government in recent weeks certainly helped to soften the blow of a recovery that has all but evaporated, “special events” or not. While there is a chance some lost growth might be recouped in the current quarter, particularly on the production side, it can’t all be clawed back.

There were some other worrying signs within the data. There was little sign of an export- led recovery or the much-vaunted rebalancing of the economy, with construction and services both ahead by 0.5 per cent during the quarter but production down by 1.4 per cent.

Another downgrading of full- year forecasts – they have been cut three times – is unavoidable.

The independent Office for Budget Responsibility is predicting growth of 1.7 per cent but that will have to come down significantly, to 1.1-1.4 per cent, noticeably slower than the US, Germany or France. Sluggish growth will not just hit jobs, businesses and consumer spending, but will also skew the arithmetic in the chancellor’s deficit reduction plans.

Pretty grim all round, really.

Fiona Walsh writes for the Guardianin London