Indications of underlying weakness in the economy came yesterday as the Office for National Statistics confirmed that the UK economy grew by 0.6 per cent in the final quarter of 2007, giving an official annual growth rate for the year of 3.1 per cent, in line with previous estimates.
However, revisions and new data revealed more worrying developments. In particular the levels of stocks in the economy – unsold goods, work in progress and construction projects –are running at a level not seen since 1973.
The prospect of what economists call an "inventory recession", where firms begin to adjust output sharply downwards in the face of slow-moving unsold items, was only partly allayed by the ONS's admission that an unquantified part of the increase was probably an accounting matter, "balancing" different ways of measuring the economy's size.
Service sector output growth was revised down from 0.7 per cent to 0.6 per cent in quarter on quarter terms, while overall investment fell, by 0.5 per cent, compared with a rise of 1.7 per cent in the preceding 12 weeks.
Predictably, construction of private dwellings saw much of the decline, reflecting the stagnant housing market.
Again, no surprise was the weak performance in the financial services sector, which still grew by 0.5 per cent, but was down from the rapid 1.3 per centpace seen in the third quarter of last year.
There was also ominous news about the corporate sector more generally. Company profits saw no growth in the last three months of 2007 compared with the third quarter, although they were still some 4.7 per cent higher than the last quarter of 2006. Even that subdued picture may overstate the health of business – a fall in profitability of non-oil companies was offset by a "large" rise in North Sea-based businesses.