Published on 25 Oct 2012

A solid but dangerous return to growth

On the face of it the recession is not just over, the economy has returned to boom time numbers. The fastest growth in half a decade since the peak of the boom years in 2007. The UK joining China in having its quarterly growth measured in digits, not fractions.

Alas, that would be a complete illusion. Stripping out the bounce back from the Jubilee (0.5 per cent) and the Olympic ticket effect alone (0.2 per cent) and you are quickly down to 0.3 per cent. In fact probably the best way to see this figure is over two quarters, where underlying growth is at 0.3 per cent in both. So it’s far from a boom, not particularly good, but could be a lot worse. Solid, considering the chill international winds.

It makes far more sense of the employment numbers and some of the strength in national insurance receipts, for example.

But it is a headline figure that could breed complacency at the Bank of England and the Treasury. I had been pretty certain that at the very least George Osborne would have used the Autumn statement to announce some sort of balanced budget stimulus. Perhaps a boost to capital investment paid for by further welfare cuts. Likewise, there had been expectations of more QE and even a rate cut from the BoE next week. 

The fact is that growth has been basically flat under this government. Its original deficit reduction plan had envisaged 5.7  per cent of growth by now. We have had just 0.6 per cent. On top of that, now it looks like the eurozone is heading for a full on recession. On top of that, regardless of the winner of the US election, the fiscal cliff there could also send the US into recession. On top of that, growth is markedly slowing in the Bric countries. There is every possibility of a triple-dip in the UK economy, and that’s even before the peril of a cold, early winter.

But will 1 per cent growth delude policy makers that all is well?

Follow Faisal on Twitter @FaisalIslam

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8 reader comments

  1. Philip Edwards says:

    Faisal,

    Great.

    That will console 1,500 Ford workers about to lose their jobs at Southampton and Dagenham.

    Also our 2.5 million unemployed and our quarter of the population living in poverty.

    What an evil, lying creed is capitalism and its propagandists.

    1. Caliban says:

      So what would you prefer instead?

      Capitalism is far from perfect. But it has delivered the highest standards of living, the most dramatic scientific advances, the cheapest, most widely distributed and most sophisticated technology and highest levels of individual liberty the world has ever known.

      What system are you proposing to replace it (and what has it achieved)?

  2. Andrew Dundas says:

    Nostalgia rules!
    Bumping along the bottom makes this just like the 1980s. Reminds me of Rick Astley, Michael Jackson, Adam Ant, Bananarama, Guns N’Roses.
    And Margaret Thatcher.
    More memories include:
    * ‘re-structuring’ of the UK economy, and a boom in folk describing themselves as ‘self-employed’ to cover up their long-term unemployment.
    * Jimmy Saville in his ascendancy
    * An army of disillusioned workers who were put ‘on the sick’ to clear them off unemployment stats.

    1. cheap air jordan shoes says:
  3. Yorkshire Lass says:

    With most of the cuts still to come I reckon Gideon’s jubilation is premature.

  4. Steve Willis says:

    I’d still like to see some good old fashioned retribution. How about looking at the potential for misfeasance by directors and former directors of; banks, the BBA and the FSA?

  5. Caliban says:

    It will certainly delude that nice Mr Milliband who was already (metaphorically) spending like a drunken sailor even before he knew we had any money to spare.

    Now he realises their might actually be some money in the kitty, he will be really splashing out!

    Expect promises of huge decreases in unemployment as public sector spending goes through the roof and armies of civil servants are recruited, and massive new public building projects (we might even be lucky enough to get another dome!). All paid for on yet more borrowed money.

    Bears do perform certain bodily functions in the woods, and Labour governments do spend too much.

    Plus ça change.

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