Sunday, 8 September 2013

Waffle About UK Economic Growth

So, the Financial Times is getting excited because the UK has managed the fastest quarter of growth in the past three years - a not-exactly-whopping 0.9% for June, July and August.  That's very nice.

Just a few weeks ago, people were getting excited about the 0.6% growth in the second quarter of the year (a proper quarter, not the rather spurious 'last three months' which is tantalising the FT).

The second figure is conflated in the first figure, of course, as there is an overlap in the periods being considered.  But even a grumpy curmudgeon such as I will accept that, yes, the economy is growing, slowly.  But it isn't terribly convincing, as it is based on internal consumer spending, not foreigners buying stuff made by Brits.  The FT notes - rather far down the article, I felt, that exports fell, particularly to non-European countries, and the trade deficit expanded between June and July - from £1.3bn in June to £3.1bn.
Britain is buying in more than it is selling overseas, so the recent growth isn't sustainable, unless the trade figures pick up.  It's a spending bubble, and will collapse as soon as the spending stops.

Yet the Tory boys trumpet the wussy growth figures as if it was a vindication of George Osborne's demented - and ongoing - attack on public spending.  Not so.

Ed and Ed - Milliband and Balls - warned that Osborne's  austerity drive would delay and reduce growth. I think that has been demonstrated to have happened. It was damn close to being a double dip and a miserable, potracted period of stagnation is nothing much to crow about.  The USA went for the opposite approach and has enjoyed comparatively strong growth.

It is worth bearing in mind that wages are stagnant here while inflation is rising; and Osborne has plenty of cutting still to do.

The crucial question is, have people become so inured to hardship that they will actually regard this mediocre growth as the dawn of a new Golden Age?

I suspect that may have been Osborne's strategy all along.

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