Thursday, July 25, 2013 

It's all just a little bit...

Considering where we've been almost ever since the coalition came to power, growth of 0.6% in the last quarter isn't to be sniffed at, especially seeing it's not boosted by one-off factors such as the Olympics.  The worry was that we could have slipped into a triple dip recession back in April, only for that low to be narrowly avoided and the double dip itself revised away.  Having took no responsibility whatsoever for the economy flat-lining, blaming every factor other than the cuts and the chill the spectre of austerity sent through business confidence, naturally Osborne and the Tories are more than happy to present what is fairly insipid growth historically following a recession as the economy healing.

On the face of it at least, the signs are encouraging.  All the main sectors of the economy grew in the last three months, unemployment is coming down, albeit very slowly, and Osborne managed to just about reach his borrowing target, once the Office for Budget Responsibility had revised their estimate.  Take a closer look though, and the figures paint a picture of an economy still heavily reliant on the service sector.  With wages not keeping pace with inflation, there's eventually going to come a crunch point when those who have so far kept spending cut back.

Despite Osborne continuing to boast about rebalancing the economy, his actual strategy is far less refined. The plan is to boost the one sector that has remained overheated with prices now rising again: the housing market.  Desperate for any kind of growth, the danger is of another bubble.  If it works for the Tories in the short-term however, helping them win a majority that otherwise looks all but impossible, who cares if it's repeating the same mistakes the coalition castigated Labour for?  Except for us nerds, obviously.  Oh, and economists.  And anyone with any real interest in winning that "global race" the coalition is constantly regaling us about.  Still, politics eh?

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7/25/2013 02:33:00 pm | |

Thursday, April 25, 2013 

Osborne as sadist.

It's a sign of just how grim the economic news has been over the past year that the fact we've narrowly missed out on plunging into an unprecedented triple-dip recession is being regarded as something approaching a minor success.  All it confirms in reality is that the economy remains broadly flat: taking into account the 0.3% decline in the last quarter of 2012, which followed on from the 1% rise in the third quarter that can be almost wholly put down to the Olympics, the economy has barely grown since the slight recovery of 2010/11.  The figures could also yet be revised down, as the full data from March and the impact of the snow has yet to come in.

If anything, it's the worst of all possible worlds.  George Osborne has rightly been under severe pressure over the past week, with a further credit rating downgrade from Fitch, the IMF finally getting off the fence, saying the chancellor's austerity programme should be loosened, and the borrowing figures that showed a minute in real terms drop of £300m.  He's used the 0.3% to claim, against all the evidence, that it's "an encouraging sign the economy is healing".  It could well be a sign that this year will see an extremely modest return to growth, but even if it is it's not going to do almost anything to reduce the deficit, nor is it proof it's his policies that are responsible.

Indeed, for all the coalition's talk of rebalancing the economy and Osborne's laughable march of the mallards makers, manufacturing remains in the doldrums (some of which is undoubtedly down to the ongoing woes in the Eurozone), while construction activity continues to plunge. The figures also make it more difficult for the incoming governor of the Bank of England Mark Carney to convince the other members of the monetary policy committee that further intervention beyond quantitative easing is needed to boost growth, which was exactly what Osborne was said to be relying on.

Of course, if Osborne were to suddenly decide that continuing with his plans as they stand is more damaging in both the long and short term than bringing the deficit down at a slower pace with the risks that entails, he would still be able to borrow at close to record lows, in spite of the credit downgrades he once scaremongered about and said his policies would prevent. Despite Plan A not really existing any longer though, such has been the success of austerity so far, we simply have to stick to whatever it is we're doing now. We've gone past the point at which this was a mere fetish to it bordering on full blown S&M, where Osborne's the sadist and we, like it or not, are the masochists. It's hurting but it isn't working doesn't even begin to cover it.

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4/25/2013 07:40:00 pm | |

Thursday, October 25, 2012 

Just an ambulance at the bottom of a cliff.

We are, apparently, out of recession.  It has to be apparently as, depending on where you live, your job or lack of one and your other personal circumstances, it's never been clearer that the official statistics tell only the slightest of stories.  For a hell of a lot of people, there hasn't been any uplift since the crash of 2008 whatsoever: only on Tuesday the ONS released statistics on net national income per head, showing there had been a decline of 13.2% since then, almost double the drop in GDP.  In parts of London and the south east by contrast, you'd be hard pushed to see any evidence that there's been a recession at all: yes, consumers have cut back on their spending to a certain extent, but for the most part unemployment has stayed low and businesses have carried on much as they did before.

Naturally, George Osborne and David Cameron have both taken credit for this first sign of recovery and while not being too triumphalist, have cited it as evidence of their policies beginning to work.  This is in stark contrast to how they, equally naturally, took no responsibility whatsoever for the previous three quarters of negative growth.  Everything other than their interventions were blamed: banks for not lending, the Eurozone crisis, Labour, the jubilee, the weather and Labour some more.  A couple of weeks ago, the word recession did not so much as pass their lips.  Yesterday Cameron informed the Commons while being pasted by Ed Miliband as is now the pattern at PMQ's that the "good news would keep on coming". 

And fair enough, growth of 1% between July and September is to be welcomed.  Once you've stripped out the 0.5% apparently accounted for by the making up of time lost for the extra jubilee bank holiday, and the 0.2% added purely by the sale of Olympic tickets, 0.3% isn't quite as impressive, but it is growth nonetheless.  Indeed, if we're being especially charitable and add that 0.5% back onto the last quarter we actually came out of recession then, albeit with a barely noticeable growth rate of 0.1%.  The figures are though prone to revision, as evidenced by the last quarter where the first announced statistics suggested a decline of 0.7%, rather than the 0.4% it turned out to be after they were twice updated.  No one's suggesting they're likely to be revised up in this instance, so it may well yet turn out that shorn of the Olympic factor, the economy remains as flat as my personality.

There's also little indication that this pattern of negative growth followed by slight recovery is going to change.  The last three months of the previous two years both saw negative growth, and betting against that happening again when prices are almost certainly going to rise would be foolish.  Even if we don't suffer an unprecedented triple dip, and that's a very real possibility if the Americans implement their planned cuts in January, our own cuts are due to accelerate over the next two years.  This is still planned in spite of the recognition from the IMF that they underestimated the effect fiscal consolidation would have on growth, and in spite of all the evidence suggesting that if the pace of consolidation was slowed in order to borrow to invest, there wouldn't be a rise in the cost of doing so.  George Osborne previously claimed, entirely wrongly, that the economy was "out of the danger zone".  Both he and Cameron could yet have to eat their words again.

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10/25/2012 10:42:00 pm | |

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