Thursday, June 11, 2009

Green Shoots

Green shoots, eh? Seen any round your way?

Yesterday's report from the National Institute (NIESR) said:

"Our monthly estimates of GDP... point to March as having been the trough of the depression, with output rising in April and May."
According to them, GDP rose by 0.3% between March and May.

Which has been seized on by some Labour commentators as confirming the economic genius of Gordo. His boldness in reflating, bailing out the banks, and slashing interest rates, has made this one of the least painful depressions ever. Much less painful than the Great Depressions visited on us by the Evil Tories.

So where's this growth actually coming from?

NIESR says both industry and private services have expanded by about one-half percent - so surprisingly, it isn't coming from booming public services (although they have grown by 2% over the last 12 months).

Which is fine.

But the real question is where do we go from here?

Because it's hardly surprising that fiscal splurges and unbridled use of the printing press can shore up demand in the economy in the short-term. But after the initial boost, what happens next?

Deficit financing on the current scale is unsustainable: the financial markets will simply not tolerate it. And roaring printing presses always have the same ultimate pay-off: an inflationary blow-out.

Green shoots they may be.

But green shoots ahead of a hard frost are not necessarily such a great idea.

PS No time for a proper blog today, because for various reasons, I had to visit Shepherds Bush. The first challenge was public transport. Fortunately, it turned out that the 94 bus makes an excellent alternative to Bob Crow's Central Line... except that it takes about four times as long. But then there was my travelling companion. I found himself wedged in on a crowded top deck by a hefty black teenager whose main aim seemed to be the intimidation of fellow passengers. He was wearing a baseball cap pulled right down, dark glasses, and a bandit-style face mask. His mp3 player was particularly loud. Now sure, he was probably a victim himself - I couldn't help noticing the scars on his wrist. But who's to intimidate on the 94 bus in broad daylight?

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