David Prosser: Chancellor's stocking is still empty

Outlook: So Alistair Darling didn't get an early Christmas present after all. After the initial, truly shocking, estimate of a third-quarter 0.4 per cent contraction in GDP, an upwards revision and better-than-expected construction numbers raised hopes that the third quarter might in the end have come in flat or even slightly ahead.

The definitive statistics published yesterday, which put GDP growth at minus 0.2 per cent for the quarter, will thus have been a disappointment for the Chancellor, leaving, as they do, the British economy officially mired in recession.

So will Santa bring Mr Darling a fourth-quarter recovery? It looks that way if the detail of yesterday's figures is any guide. Had it not been for continued destocking – and at a faster rate – the economy would have grown by 0.1 per cent in the third quarter. That destocking will not continue indefinitely, and will have left businesses in better shape.

Also, note that consumer spending was up for the first time since the first quarter of 2008 – it should be better again in the current three-month period as people bring forward spending in order to beat the return to the full rate of VAT on New Year's Day. Our exports, too, are improving – not least thanks to the weak pound – while investment has also been revised upwards.

The bigger question marks, though, concern the sustainability of the recovery, anxieties that are all the more troubling given the Chancellor's borrowing forecasts. The withdrawal of the fiscal stimulus – starting with the VAT and stamp duty rises next month and followed by the end of the scrappage scheme – is quite a headwind to face. Further tax rises in April will add to the challenge.

Another factor will also damage consumer spending, jeopardising the recovery. The latest figures put Britain's savings ratio at 8.6 per cent, its highest level for almost 12 years. That Britons are putting money by for the future, rather than racking up further borrowing, is something that should help to put households on a sounder footing for the long term. But in the short term, all that money saved is money not going into refloating the economy.

These worries aside, however, now that we look to be on the verge of escaping recession, we should at least nail the lie about the UK having been harder hit by the global downturn than any of its rivals. The Conservatives have made much of the fact that Britain was the only G20 country still in recession at the end of the third quarter, but while it is true we have endured a longer slump than other countries, our total contraction has been smaller than that of Japan or Germany, for example, and pretty much in line with the US. Only the French, with their balanced economy (and very large state sector) have genuinely outperformed.

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