25 Apr 2012

These GDP figures are terrible news for the coalition

In the end, it wasn’t marginal. This morning GDP figures show Britain clearly back in recession, the dreaded double dip, with GDP in key one at -0.2 per cent.

In the past bad figures like this have been the subject of attempts to write them off, to suggest that they’re in some way anomalous. No room here, I’m afraid. As the chief economist of the ONS told me this morning, “There are no special factors.”

This figure is driven by poor performance of the construction sector, which fell a whopping -3 per cent in the quarter. And that in particular is the focus of some controversy because many construction firms say it doesn’t reflect more positive news they’re hearing.

But the ONS pointed specifically to weakness in public sector construction, so that is government infrastructure spending. The ONS also mounted a robust defence of its construction data, saying 8,000 respondents were repeatedly asked for the picture.

It is, of course, possible that this fall will be revised away, although that has not been the pattern in the past few quarters. But this figure does shine a light on the big picture, that there’s been almost no growth for two years. Indeed, in seven quarters since the government came to power, the economy has grown just 0.4 per cent. That compares to 4.3 per cent that was forecast in the coalition’s original deficit reduction plan of June 2010.

So that’s the big picture. It’s terrible news for the government, on top of everything else. They point to the eurozone and the fact that Holland and the Czech Republic are also in recession, and restate the notion that borrowing more would make the problem even worse.

But just a few days after George Osborne told me that the austerity argument had been “completely won”, these numbers will surely reopen the debate about this government’s economic policy.

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