Business owners and the self-employed will have breathed a sigh of relief as the ONS’s early estimate suggests that the UK will have avoided a triple dip recession. But we’re a far cry from being able to be complacent, despite what the Government says, since you only have to look at the figures to see the economy just ‘edged it’.
It was perhaps a surprise to some, particularly given the bad weather in March, the economy as a whole managed to grow by 0.3% in the first three months of the year. That’s just a tad more than pundits had been predicting but is due in a large part to a stronger than expected performance from the service sector.
But underneath the rosier than expected headline there is continued cause for concern. The services sector grew by 0.6% and industrial production by 0.2%. But a caveat applies because industrial production also includes North Sea production. However the construction sector, which is often held up as a litmus test for the immediate prospects for the economy, actually contracted by more than 2%.
What’s been referred to a ‘spring bounce’ for the economy masks a pretty awful start to the year for retailers while the cold weather naturally saw households turning up their heating hence the earlier point about North Sea revenues.
Put this in context and some are arguing the economy isn’t growing in a meaningful way, since the ONS itself said that GDP has “been broadly flat for the last 18 months”. Some economists would agree. Over a 5-year period, experts say a healthy economy might grow by 10-12%. Over the same period the UK economy has managed just 2.6%. In truth every percentage point of growth that fails to materialise has a negative impact on tax revenues and jobs.
It’s no wonder then that the Chancellor continues to find himself under pressure. It will be interesting to see what the IMF makes of it all when it arrives in the UK this week. The Chancellor may have avoided the worst of it. Yet, there is no broad consensus that current policy is working. In fact, some suggest we have avoided a third recession by the skin of our teeth.