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UK avoids a double-dip

Andrew Neil | 10:30 UK time, Wednesday, 27 April 2011

So it's back to the future at the British economy: it grew by 0.5 per cent in the first quarter of 2011, recovering from a contraction of 0.5 per cent in the fourth quarter of last year.

In other words the economy was effectively stagnant over the past six months: gross domestic product (GDP) was same in the first quarter of this year as it was in the third quarter of last year.

The latest official growth figures are broadly in line with City expectations but, interestingly, below the predication of the Office for Budget Responsibility, which had expected 0.8%. Of course 0.5% for Q1 is an early estimate which could be revised (up or down 0.2%, says the Office for National Statistics).

Manufacturing is still growing nicely (+1.1%) and construction had another bad quarter (-4.7%), probably reflecting the cuts in public investment begun by the last government and continued by the current one.

Some of the growth in transport and other areas reflects a bounce back from the Oct-Dec slump.

Probably a mistake to read too much into these latest growth figures, especially since they're preliminary.

I think we can safely say a double-dip has been avoided. But growth this year is unlikely to be no more than lacklustre.

And with retail sales in the doldrums, living standards squeezed, house prices still falling, inflation still strong and the economy no bigger than it was six months ago, pessimists will not be ruling out stagflation (ie little or no growth and rising prices).

Comments

  • Comment number 1.

    The prospect for jobs is very very bleak. The UK is going bust. This is a return to the 1980s: mass unemployment, violent social unrest, soaring crime rates. Be scared, be very scared.

  • Comment number 2.

    The economy being the way it is is no surprise, it can be laid at Labour's door, and the Bank of England's door.

    Labour performed a massive devaluation of the UK Pound, driving up import costs, so any exports that we have are uncompetitive. Labour also went on a public sector spending binge before the 2010 general election to give the impression of growth, where there was none. Indeed, in Q4 2009, the ONS admitted for the first time it included "Government spending" in GDP figures, where it did not do so before.

    The Bank of England has been busy trashing the UK Pound as well, instead of raising interest rates to attract foreign capital, they are keeping rates artificially low to prop up the housing market. Until the house prices are FORCED to have a proper CRASH, the UK economy WILL NOT RECOVER.

    Savers are refusing to spend like they would in a traditional downturn, because their money is being stolen to prop up the feckless borrowers, which includes the government.

    The press hail the 2010-11 borrowing figures of £141Bn is a vast improvement on the predicted figure. But the prediction is just that, a prediction, not a target to aim for. And so what that we may eventually stop borrowing £141Bn, the deficit is £4 Trillion, and not being tackled at all.

    STOP thinking that the UK economy is house prices, stop taking money from savers, and stop printing money, THEN the UK will start to recover. Until then, the UK economy will remain in the dumps.

  • Comment number 3.

    If you want to know why the UK economy is the way it is - in the poor house, watch today's interviews that Ed Balls gave on Sky News and BBC News channels.

  • Comment number 4.

    Andrew, Whilst I agree UK house prices are still falling your link at the end is to a BBC story on Chinese house prices.

  • Comment number 5.

    Now that Stephanie Flanders has reported Andrew Sentance's Parthian shot at the BoE monetary policy committee I am a convert. Raise interest rates now! Stop the rot, give savers what they deserve, likewise debtors. Time to start cutting up those 2nd credit cards and store cards, let spending be done by people who have their own money. A fool and somebody else's money is soon parted. And yes, property is still way overvalued, until there is a direct relationship between the average wage and the average semi we are still in pre-bust cloud cuckoo land.

  • Comment number 6.

    Wait until the sustained high price of oil kicks into the economic figures, then we will see the double dip.

    Plan B Mr Osborne?

  • Comment number 7.

    Why is growth so important...?
    Why is it essential to see economic growth every quarter...?
    I agree it might be desireable, but from some of the reporting I'm getting the impression that the world is going to end if growth figures are zero or negative...

    Haven't we got our priorities wrong...?
    What does it actually matter if economic growth is low or moderately negative...?

    Why was economic growth top-story on the Six-O'clock news today...?
    Surely there are more important things happening in the world...?

  • Comment number 8.

    Why is everyone obsessed about a double-dip?

    After what happened in the autumn of 2008 a multiple dip was almost inevitable. This isn't a recession: its a managed slump. Rather than allowing economic collapse to wipe out the bad debts we are seeking to manage those bad debts into irrelevance. We might succeed in that respect, we don't know as it will take a long time, but the truth is now out, the Brown bubble has burst and we now have to get on with the harsh reality.

    Money is very tight, opportunity is constrained and we badly need an economic strategy that adds value, creates jobs, and rebuilds our towns and cities. For this we need an industrial policy that intervenes in the economy before breakfast, during lunch and after tea.

    We don't need house prices to recover but we do need to get our fields, factories and workshops back into production. The figures can dip all over the place but with the right plan, the right policies we can get through all this trouble and come out the other side as a far better place than what we were when it all started.

  • Comment number 9.

    Collectively, we all know that house prices are well overvalued and still need to drop 30% to get back to trend. Individually, there is of course a reluctance to accept this and take the hit.

    Nothing is going to change until individuals' circumstances force those prices down. If this isn't going to be done voluntarily there is either stagflation or spiralling unemployment leading to repossession leading to fire sales can do it for us.

    Life's full of great choices.

  • Comment number 10.

    1#

    "you're all dooooooooooooooooooooooooooomed, doomed, I tell you! The martians are coming!!"

  • Comment number 11.

    Is it pessimistic to talk about stagflation or are the real pessimists those who ignore it until it is too late to do much about it? Instead of the usual political kickabout it was interesting to read a critique of the Bank of England's role in all this.

    "This brings me back to a theme of mine for the UK which is stagflation. How do we define it? No growth since the third quarter of 2010 and an official inflation rate which at 4% is twice its target seems to do the job. The first part of the sentence gives us the stag and the second the flation.

    If we put to one side my view that the UK needs a change of economic policy and look at the consensus view of our Monetary Policy Committee it is apparent that they are in danger of not only failing on my terms but also failing on their own. In truth we can see that they have really targeted economic growth in the UK and the result of this has been no growth at all over the past six months."
    http://t.co/N7lgcyW

  • Comment number 12.

    '4. At 13:08pm 27th Apr 2011, Ralph Corderoy wrote:
    Andrew, Whilst I agree UK house prices are still falling your link at the end is to a BBC story on Chinese house prices.'


    At least, having arrived here via Mr. Robinson's latest blog, the picture does at least tally with the story. Well, on that page at least.

    Give it a few more weeks until the school hols are over.

  • Comment number 13.

    Good morning each & Andrew.

    Stagflation, inflation, growth...

    Give a dog a name, bad or otherwise, and it will stick.

    What are we so afraid of? Why not bring politics back to the people instead of this eternal joust between Westminster villagers.
    Stagflation etc. are nothing but a list of (non lethal) weapons or colour choices at some paint-ball fracas.
    'Growth', is but the easiest of them to pronounce.
    What of stability? What of a broad and firm foundation to the economy? I notice that lately the motor-manufacturing industry is bemoaning the paucity of home-built parts. Who's idea was it to kill-off this, once thriving, national carpet of small-businesses? And what good news it all seemed at the time.

    BTW.
    What the blue-blazes is the actual criteria of assessment of this AV referendum?
    What if the number of those opting either Y or N fell well short of the number that turn out to vote at the local elections?
    IF only five folk bother to take part and vote three to two, is that job-done?

  • Comment number 14.

    12. JunkkMale

    Lucky you managed to get on NR's page. I think the mods have found a new way to close down for the day while keeping the blog 'open'. Can't access the last page. Unless that's just me being told I'm struck off the guest list.

  • Comment number 15.

    It is not only about interest rates. It is also about the wall of money generated by Quantitative Easing, that is why commodity prices are rising, as well as share values. We had 'Steady Eddie' and now we have 'Merv the Swerve' only like the aged footballer he has lost some pace, and ability to dribble. I am sure that if the BofE had their way they would like us all to 'calm down' whilst they try to 'get a grip'. Of course the last tool in the box might well be an injunction to stop people talking the economy down, and telling the Bank what an absolute waste of space they are, well that's what I think anyway.

  • Comment number 16.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 17.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 18.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 19.

    Growth in America has slowed to 0.4%, as one of our major export markets that bodes ill for our continued recovery through exports.

    Still all to play for on the economic front - including many matters outside our immediate control.

 

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