Tuesday, January 26, 2010

Flat On Its Back


"I would be astounded if the UK did not grow in the fourth quarter of 2009 and would have to seriously consider giving up economic analysis and forecasting."
So said a well-known City economist yesterday, on the back of a City consensus predicting robust fourth quarter GDP growth of 0.4%. Given that the ONS has now released its official estimate of 0.1% growth, it looks like he gets to stay on.

But only just.

The reality is that the economy remains flat on its back, 6% down from the peak. Despite Brown's much hyped reflationary measures, the UK has suffered a bigger recession than the OECD as a whole (6% GDP loss against an average 4%), and is emerging from recession more slowly, 3-6 months behind the curve.

And now what?

This quarter's growth - such as it was - came from just two key sectors. The government sector (24% of GDP) grew by 0.1%, and shopping (aka Distribution, 15% of GDP) grew by 0.4%.

Unfortunately, both of of these sectors now face what's politely known as retrenchment. Government spending faces the axe, and shopping faces two VAT rises in a year, plus higher interest rates.

Manufacturing? The BBC's preferred last hope for busted Britain? Well, that did grow by 0.3%, but it's still a staggering 14% below its 2007 peak, and in any event it only accounts for 13% of GDP.

So despite what our uniformly bullish City economists are now telling us, the outlook remains mixed to catastrophic.

But, hey, what do we know? Tyler learned many years ago not to rely on economic forecasting - or darts as you may know it. Admittedly, that was largely as a result of his own somewhat less than championship performance on the ocky, but he has yet to spot anyone with a noticeably more consistent technique.

Which is why we need a government that will concentrate on getting the public finances sorted out, not one that still thinks it can run counter-cyclical fiscal policy. As we discovered back in the 70s, governments simply don't have the foresight to manage that, and they're very likely to do more harm than good.

PS There were some classics on BBC R4 Today this morning. First, the Reverend Easton brought us news that 200,000 British children are still denied proper food and clothing because of "poverty", implying that doling out even more taxpayer cash would somehow solve the problem. Second, the Very Reverend Roger Harrabin confessed that his friends at the IPCC are only human after all, and may make mistakes - like lying about the Himalayas melting. But strangely, he did not go on to draw the obvious conclusion. Third, there was all round presenter bafflement at this morning's social survey showing that although we've all become totally chilled about gays - GOOD - we've also all become Conservatives - BAD. How can that possibly be? Surely everyone knows Tories are evil queer bashers, and always will be. Blinkered prejudice, eh? What can you do with it?

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