The UK economy shrank by 0.5 percent last quarter, a sudden and unexpected contraction. The government attributed the poor result to the weather before Christmas. Snow certainly did stop construction and keep people away from the shops but even without it growth would have been flat.
It seems to have taken many commentators by surprise, except those who had been predicting exactly this result as the consequence of government policy to restrict spending. What's more, the VAT rise has only just been brought in, with another tax rise (one percentage point on National Insurance) to come, and most of the spending cuts haven't been put in place yet.
It doesn't look good, frankly. The government claims that the private sector will start to expand as the public sector shrinks, but I don't think many people believe it.
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