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Good news on GDP

Stephanie Flanders | 10:40 UK time, Tuesday, 26 October 2010

They say you can see evidence of a stifled recovery everywhere.  Everywhere, that is, except the official statistics. Today's 0.8% quarterly growth figure is the strongest third quarter figure in a decade.

The GDP numbers are going to jump around a lot over the next year or so - they always do. But if you look through the quarterly ups and downs, today's preliminary estimate suggests that the UK economy is now 2.8% bigger now than it was a year ago. They also suggest that the UK has been growing, on average, at an annualised rate of roughly 3.2% since the start of 2010.

Cranes over west London

 

Beneath that headline average, the strongest sectors have been construction, distribution, hotels and restaurants, and business and financial services. If the figures are right, output in the construction industry is now 11% higher than it was a year ago; the distribution sector is up 3.2%; and business and financial services have grown by 2.9%.

Interestingly, government and other public services have grown by just 1.1% over the past year, though remember that this does not cover all of the ways that government supports the economy. For example, as I've discussed in the past, public investment money often takes a year or more to feed through into output.

So, there's no doubt that the figures tell us good news about the recent past. What about the future?

The government would say it shows that fears of a stifled recovery are greatly overdone. The opposition - the so-called "deficit-deniers" - would say it shows that spending cuts have yet to bite. Who is right?

The honest answer is that we don't know. But, on the government's side, remember that the primary government deficit - the gap between spending and revenues, before debt interest, has fallen by more than 3% of GDP in the past 12 months (see my post of 13 October for the precise details). By that measure, fiscal policy has tightened more in the past 12 months than in any single year of the government's plan. But somehow, the economy has managed to grow by 2.8%, roughly its long-term trend rate.

You might hope to grow a bit faster than that after such a deep recession. But in past recoveries, it has usually taken some time for the recovery to build up solid momentum. This is unlikely to be an exception.

The lurking fear, in these numbers, can only be that the UK is behind the curve. After all, growth was strong in the early part of the US recovery, as well, only to slip back sharply in the summer. Given the importance of the US market for many UK exporters - and signs of weakening consumer confidence here at home - you still have to wonder whether this level of momentum can be sustained.

That will be one question that the Bank of England's MPC will focus on when it meets next month, with a new set of quarterly set of forecasts. The other question will be whether we are raising our expectations of inflation, as a result of the official CPI measure staying so long above its target rate.

Before today, there was perhaps a 50-60% chance that a majority on the committee would support more quantitative easing. I suspect that probability has now fallen. But with most economists still forecasting sub-par growth in 2011, I wouldn't rule it out - if not next month, then early next year.

There is still plenty to worry about in this recovery: much of it beyond our shores, and beyond the government or the Bank of England's control. But for today at least, I think we're allowed to join the cabinet in a sigh of relief.

Update, 1503: Simon Ward, from Henderson Global Investors, has just sent round a useful graph comparing this recovery with past upturns. Relative to the previous peak, it shows that our national output is now slightly higher than it was at the equivalent stage in the recovery in early 80s. The bottom line is similar: you can't call this a strong recovery, but it's not the weakest we've ever seen either.

Graph showing UK GDP recessions/recoveries

 

Gilt yields have risen sharply on the news, bearing out what I said in Friday's post about last week's fall in yields. Right now, bond investors are more concerned with Britain's growth prospects than with the size of the government deficit.

On that subject, the Treasury is predictably cock-a-hoop that the ratings agency, Standard and Poor's, has revised its outlook for the UK to Stable from Negative, and affirmed the country's top credit rating.

The chancellor has repeatedly said that Britain was "close to bankruptcy" when the coalition came to office. Despite that, it's interesting to note that S & P was the only major ratings agency to ever formally put the UK's triple A rating on negative watch, last October. Now that medium-sized shadow has been lifted, Mr Osborne can talk, once again, of having brought Britain "back from the brink".

I hesitate to cast any droplets on the chancellor's parade, but note that he is saying the government's spending cuts have transformed the country's creditworthiness, yet will not make a noticeable dent on the recovery. If true, that would be a pretty impressive trick to pull off. Indeed, some economists might wonder whether it were actually possible.

When people raise fears about the impact of deficit cuts on the recovery, Mr Osborne likes to say that the government's plans are not that different from Labour's: a matter of a mere £6bn a year in extra spending cuts, on average, between 2010-11 and 2014-15, roughly 0.4% of GDP (or just over 1% of spending).

Yet, on the government's own telling, that modest amount of additional tightening has somehow been enough to take us from the "verge of bankruptcy" to having some of the safest sovereign debt in Europe.

If you claimed to have achieved that kind of turnaround in a company's fortunes, on the back of extra cost savings of just over 1% a year, people might wonder whether the talk of bankruptcy had been ever so slightly overdone.

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Comments

Page 1 of 4

  • Comment number 1.

    If the government had the confidence that the performance of the economy is good they would not have had to slash and burn as they did with the CSR. Good growth in the economy would sort out a not insignificant part of the deficit. Will OBR now revise its forecast of the size of the economy over the CSR period?

  • Comment number 2.

    The lag in growth is the result of policies implementted by the previous government - the coalitions policies will not have filtered through to output as yet; as Stephanie says in our real world of high streets and labour markets we see little signs of growth. House prices are still falling and lots of new construction orders are on hold or cancelled. Once the backlog has cleared and the impact of the emergency budget / CSR start to bite the real world we'll see the figures turn south. Just at the point the stimulus implemneted by Labour was starting to show in these very good growth figures the coalition has turned off the tap. Just as growth is returning is when support is needed most but instead Gideon and Camerclegg have trampled those fragile green shoots and for that we'll all feel the pain in 2011...

  • Comment number 3.

    "Given the dependence of UK exporters on the US market - and signs of weakening consumer confidence here at home, you still have to wonder whether this level of momentum can be sustained."
    We keep getting told we can't leave the EU because this is our main export market. Now you're telling us the US is crucial. Which is it dear Stephanie?

  • Comment number 4.

    Smoke & mirrors. There can be no real recovery until asset prices fall to proper market levels. If your using 'Mark to Management' accounting rules then balance sheets will always show a favourable position. But don't be fooled, many institutions remain underwater. By artificially inflating asset prices and engaging in QE the 'powers that be' are actually ensuring no sustainable recovery takes place. The basis of growth after recessions is that a fall in values is eventually turned-around to provides the base for new growth under altered circumstances. By propping-up property prices in particular (whilst there is still actually falling demand) a proper relalignement is rendered impossible. Stagnation, viz Japan in the 90s, will be the inevitable result.

    Despite comments otherwise, I still suspect that this constant reflation of falling asset prices is linked to the 'rescue' of securitized loans. The derivatives from these products have already been dragged from the future and spent, hence a fall in their values is deemed unacceptable. This was a factor not present in past recessions and where it will lead is difficult to assess, but it certainly makes this recession/depression different from previous.

  • Comment number 5.

    If there is supposed to be strong performance in the construction industry in these figures perhaps it should be shared with the skilled workers in that industry.I have two children who are skilled tower crane drivers and both are scratching around just to stay in work.They are like a great many construction workers where work has gradually dried up over the last year and a half.Wages have been driven down to near minimum wage rates and builders dont know where the next job is coming from.Recovery?Who is kidding who?

  • Comment number 6.

    The biggest problem is that growth must come from the private sector, and particulalry manufacturing.

    I hate to harp on about bank lending but it is just not happening. I am a director of a recent start-up in Cambridge and we are experiencing incredible growth, 90% of which goes to export. Would our bank support us - NO. We found an alternate source of funding for the working capital needed to expand (this was only needed for 4 weeks!) and this is now in the past until the next change in rate of growth is experienced.

    Unless funding becomes available for such growth, the ability of companies to expand will be limited.

  • Comment number 7.

    There is no lasting growth in this economy the last ten years have proved that. We need to aim for a sustainable stable economy with improved living standards by smarter spending. Improved energy supply, public transport and housing and less Chinese trainers and flat screen tv's. It can be done.

  • Comment number 8.

    Bryn the Cat says it. G Osborne can claim it is good news but the negative effects of slash and burn will take several months to work through and everybody seems to think that cutting public sector budgets is the same as cutting the deficit forgetting the inverse multiplier effect and that making large number of people redundant, especially those with long service is actually more costly than employing them in the short to medium term. To talk in terms of natural wastage is to live in fantasy world along with the prospects of an export lead recovery.

  • Comment number 9.

    "You can see evidence of a stifled recovery everywhere these days. Everywhere, that is, except the official statistics. Today's 0.8% quarterly growth figure is the strongest third quarter figure in a decade."

    There never was a recovery Stephanie. GDP increased, and that is the only basis you have for there being a recovery when the beloved Labour party were in power. The employment rate has ticked down 9 times out of 10 so how can you say there was a recovery when there are even less jobs and even less people looking for jobs? But oh wait, now GDP has beaten expectations and the Tory's are in we better say dismiss GDP as an indicator and say it does not show a recovery!

    GDP was never going to fix the problem. This is not a normal recession. The USA has some of the same problems we do. Consumers are de-leveraging due to being completely over burdened with debt due to an asset bubble. Real people cannot afford to pay for the things that 3 years ago they thought they owned, but in reality they don't. The average person is still struggling. Banks/Financials reporting record profits might send the GDP up, but it doesn't do any good for wealth distribution.

  • Comment number 10.

    As growth is now near its normal levels, we can get the base rate closer to its normal levels.

  • Comment number 11.

    Analysts and UK financial commentators once again have got it wrong. They have it wrong not because of any in depth analysis on their parts, but quite simply because they do not like publishing good news for the UK economy so do everything they can to make it bad ! Ireland, Spain, Greece are pretty well bankrupt. France in on constant strike and you never know what is going on Italy because the true picture is buried somewhere. Germany is OK but does not represent the whole of the Eurozone. So compared with the rest, the UK is really not doing too badly. Yet our commentators continue to talk "doom and gloom" Nett result, forex speculators make a killing and meanwhile us poor UK businessmen trying run a business with constant Sterling volatility continue to suffer. It is about time our so called expert fiancial commentators started standing up for this country !

  • Comment number 12.

    AGH46: both US and Europe are extremely important export markets. EU makes up a larger total contribution than the US though:

    exports by country: United States 13.8%, Germany 11.5%, Netherlands 7.8%, France 7.6%, Ireland 7.5%, Belgium 5.3%, Spain 4.1% (2008 figures)
    -- http://en.wikipedia.org/wiki/Economy_of_the_United_Kingdom

  • Comment number 13.

    Stephanie

    What was the fall in construction growth over the last 2 years?

    What impact on the figures are the Olympics having - they will be building up to their peek in terms of activity over the next few months.

  • Comment number 14.

    AGH46: Surely UK exporters can be dependent on more than one market? The facts are that half of our exports in 2009 went to EU countries, 17% to the so-called Piigs (Portugal, Italy, Ireland, Greece and Spain). That is why I always say we have a big stake in the outcome of the eurozone crisis. But by far the largest national market for UK exporters is the US: 17% of our exports went to the US in 2009. We also enjoyed a £11.5bn current account surplus with America last year, as compared with a roughly £14bn deficit with the EU.

  • Comment number 15.

    1. At 11:28am on 26 Oct 2010, watriler wrote:
    If the government had the confidence that the performance of the economy is good they would not have had to slash and burn as they did with the CSR. Good growth in the economy would sort out a not insignificant part of the deficit.
    --------------------------------------------------

    I totally disagree. Throughout Brown's boom years when the economy was growing strongly we still had a significant deficit. It was and is structural. If we do not remove that we are on the road to oblivion. Natural short term growth per se will not get rid of it.

  • Comment number 16.

    "2. At 11:51am on 26 Oct 2010, Bryn The Cat wrote:
    The lag in growth is the result of policies implementted by the previous government"

    Well that might be true in some areas, but it isn't the case as far as construction and manufacturing are concerned. I work as a professional in the construction industry and most of our redundancies were felt in 2007-2009; this was due intially to cancellation or postponement of commercial projects and latterly by cancellation of publi funded projects such as BSF (schools). Since the election, a combination of slightly easier bank lending and ore realistic demands from local authorities for Section 106 contributions has helped to make some projects viable again. That combined with a reduction in construction costs has meant that things are slowly improving. Nothing in the CSR is likely to change that as the worst pain has already been allowed for. My brother works in manufacturing and tells me a of a broadly similar tale there, also helped by the current state of the pound.

    I can see that the CSR could result in local problems, especially in areas which are over-reliant on public sector employment, however I do not believe the economy as a whole is likely to go back into recsession. I base this on the fact that by and large uncertainty (finacial and political) has been replaced by certainty (of the same). As a result business planning is easier now than it has been for 3 years.

  • Comment number 17.

    The latest GDP figures are good news for the British economy. Unfortunately, given the year to 18 month lag between action and outcome, we might have voted in the wrong party!

  • Comment number 18.

    So the sky has not fallen in after all. Despite all the attempts of the BBC, unions and the Labour party to talk down the British economy and destroy confidence, it has not happened. It just goes to show they can't even do a good job in opposition.

  • Comment number 19.

    As you quote in your article the main growth areas are Hotel, Restaurants, Business and Financial servies. These areas don't require a great deal of skill and are the main areas for employing part-time workers thats why the wages are low.The industrial areas this government should be investing in are the Engineer/Shipbuilding industries where the real growth will come in the future,for once thes industries loose the skilled worker which are the bedrock of all industries it takes years to recover if it ever does?.Therefore i still believe this government and the previous one can't relate to industry and a double dip recession could be on the cards.

  • Comment number 20.

    Just to follow up on Stephanie's post 14:

    The main reason to belong to the EU if it's your principle export market is that you gain a modicum of influence over it's internal market policies. For example: safety requirements on electrical goods. We (the IEE) used to control this for the UK, but if your electrical goods are intended to be exported to the EU they will now be marked CE. This is a European-wide body that sets electrical safety standards; it includes representatives from the UK's IET (successor to IEE, the electrical engineering governing body).

    This is all low-level EU politics. It's about coordinating standards for European-wide markets. Unfortunately, I'd be taken more seriously at these sorts of meetings if our government were to be a bit more positive about Europe. And that's the real tragedy: when Franco-German dominance comes to an end (Sarkozy and Merkel seem to be about to have a falling out), will the UK be in a position to exploit this for UK industries benefit? I doubt it.

    The alternative is to go it alone, and drop out of Europe. And then hope that our industry is given sufficient advance warning of changing standards that they don't get caught flat-footed. Well, do you think French and German industry would let us know their decision making in advance? No, me neither.

    Just for the avoidance of doubt: I think the pro/anti European decision is quite finely judged, but there does not appear to me to be an obvious, easy, course to take. And for thirty years, our politicians appear to have taken the same equivocal view.

  • Comment number 21.

    If the economic recovery is gaining slow but steady momentum and inflation is consistently over its target level then it is becoming increasingly obvious that the only real function of QE is to lower the value of the currency. The problem for the BoE, but the advantage for the rest of us, is that without these other spurious 'reasons' everyone can see what the game really is all about.
    It wouldn't surprise me in the slightest if many in the MPC weren't secretly cursing these figures...Their 'fig leaf' has been removed.

  • Comment number 22.

    So, because these figures don't reflect the doom and gloom forecast by the BBC and the Labour Party you are casting doubt on them so that you continue your apolcalyptic reports. These are the sort of contortions we expect from politicians who can't accept that they were wrong.

  • Comment number 23.

    "You can see evidence of a stifled recovery everywhere these days. Everywhere, that is, except the official statistics."

    Recessions aren't just about slowing down, they are also about corrections in the economy. We were engaged in the unsustainable so it didn't sustain. As part of the correction we need to switch from the fluff of consumerism at home to a higher level of exports and this means some parts of the economy will be for the chop.

    Unfortunately many haven't grasped this and are assuming things will return to the way it was a few years ago. Only yesterday on the news some start-up was complaining that the bank wouldn't lend him the equity he needed and he had to approach friends and family. Well banks shouldn't be providing equity, that's what was wrong. This is part of what got us into this mess. Equity and equity risk is the role of the shareholder.

    If we only look behind us then we risk crashing into the future.

    If we spend out time looking backwards we are going to miss what's coming

  • Comment number 24.

    It looks like the industries which performed before the crunch are still performing. This is good news. However, how long construction will stay in that category is open to question.

    It is quite apparent that a lot of the prevailing cuts are those efficiency savings made previously by Mr. Darling. The wicked ideological cuts by upper-class Tory vampires seeking to gorge on the blood of innocent public sector employees won't arrive on a High Street near you until well into next year. This is always assuming that the Coalition's spending review actually turns out worse than those planned by dear Darling.

    What would be nice but which remains a long way off is confidence. It is going to take many quarters before we get there and so growth will remain bumpy. I don't think any confidence will return until the banking sector is fully reformed and focussed onto developing the real economy in the UK as opposed to inflating the price of apartments in Dubai.

    Until we start getting some investment and government support in manufacturing and R&D we cannot expect our affairs to begin to prosper. Even then when we do turn that vital corner we will still have to address the issue of our burgeoning National Debt and those other, off-balance sheet obligations.

    We are going to have to come to appreciate that the only way out of this shambles is to get as many people as possible creating value which will provide a solid economic platform for the future

  • Comment number 25.

    I just don't believe the figures.... or rather the story the figures indicate.

    I would love to be proved wrong but my fear is that when we get to the end of the current liquidation of 'soft savings' by people and companies alike, who see zero returns as obviously no incentive to retain cash, we don't hit a sudden and dramatic set of statistics showing the underlying reality that I fear remains unaltered

  • Comment number 26.

    The slow growth in US and Europe is the reason UK businesses, Politicians and Union bosses need to get out and promote UK in the high growth areas of Asia and Brazil. By growing our market in these areas we can bring Jobs and wealth to the UK

  • Comment number 27.

    It is also worth noting that total Gov't spending this year (exc. debt interest) will be £15bn higher than last year.

    The £81bn "cuts" is a totally spurious figure based on what would have been spent over the next five years had spending continued on Labour's profligate trajectory. (GDP like that we can do without).

    The next 5 years' public spending plans (exc. interest) actually amount to approximately a 1% increase annual increase v. 2010 spending. That in itself ought not to be enough to cause a recession if the private sector continues to grow (from a low base, thanks to the deep private sector recession).

    Hence the "surprise" today. Public and Private sector growth.

  • Comment number 28.

    SPIN! In what planet is movement from 1.2% to 0.85 mean progress or growth and calls for celebration? That BLUE plannet where so called journalists are in a blind romance with a gambling government. Keep the message positive. Tories for ever! No matter what.

  • Comment number 29.

    If we get two or three more quarters of reasonable growth numbers will those forecasting doom and gloom admit their errors?

    I heard Angela Eagle on Daily Politics and I hope that her remarks will be repeated to her endlessly next year. Its going to be OK.

  • Comment number 30.

    Does this mean that interest rates can at last be put up?
    As we are doing so well, I think not. So doesn't that tell you something we are not doing that well!

  • Comment number 31.

    Given the importance of consumer confidence on our recovery, I really think the BBC needs to start being more responsible in its reporting of these matters.

    When I first checked the website this morning, there were gloomy forecasts of 0.4% being given as headline figures. Even though these figures were estimates, they were enough to get me worrying again. Then, lo and behold, the actual growth figure is twice the doom mongering forecast. And yet the analysis suggests that we may just be behind the curve so expect a crash in the future.

    From the way the 0.8% figure is being reported, there almost seems to be a twinge of disappointment that reporters can't now revel in their apocalyptic forecasts and blame it all on the coalition's austerity cuts.

    As for the Labour response, of course they are going to deny that steady growth figures mean, well, steady growth. Steady growth under the coalition is a bad thing for Labour, as they know it will keep them out of office for a long time to come.

  • Comment number 32.

    I would NOT trust Stephanie Flanders and the BBC which are basically a liberal democrat point of view and how can you trust someone who wishes the recovery to fail?
    BBC are in step with the Labour part who are totally out of step with the drastic actions needed to repair this country and its economy.
    I would start first by cutting the fat cats wages within the BBC and certainly cut their wages to fall in line with normal working class people.
    After all it is the working tax payers of this country that pay the inflated wages of the BBC.
    Its because of the BBC and its Liberal views that this country are in the mess that we now face and it will take a strong Coalition to get us out of this mess and on the road to financial recovery of which they are doing a grand job so far.

  • Comment number 33.

    Does anyone know how these GDP figures are arrived at? Obviously not a 100% sample. I suspect that they are extrapolated from a very small sample.

  • Comment number 34.

    Dear Stephanie, Surely a rather negative way to begin your blog? Where is the "evidence of a stifled recovery" that you can see "everywhere these days"? If, as you say later in the piece, the honest answer is that we don't know what's going to happen, what is the benefit of being pessimistic? Having just had some rather good news about economic growth, I feel it would be be better to be neutral or even mildly optimistic about the prospects. I really don't understand why journalists appear to be keen to talk us into a further recession.


  • Comment number 35.

    A word of caution, Blogger and posters all. There is a plus/minus error margin in most things in life and that for GDP would, in some circumstances, probably swallow 0.8% in one gulp.

    Let's be patient, hang on in there, and do all we can to survive and help others do the same. There's a long way to go yet.

  • Comment number 36.

    Only you and your other left wing biased pundits in the BBC could find so much negativity in some good news for the country and the Coalition. The numbers are better than you expected so you cast doubt on the statistics. If the numbers had been as you expected or worse it would have all been the fault of the wicked Government and their cuts. There would have been no suggestion then that the stats where dodgy I bet.
    If I was part of the coalition the first thing I would cut, long and hard, would be the institutionally left wing BBC. It would improve their chance of winning a second term, without having you lot pitching for left wing policies. I have to pay a licence fee to listen to this Labour propaganda!

  • Comment number 37.

    GDP figures are just one indicator of what's going on in the economy. So they are encouraging but we shouldn't get too carried away either. The key to a broader based recovery is consumer demand and expansion of the private sector. We'll have to wait for the first half of next year to judge how this is going. I think that there are some encouraging signs outside the UK too. The USA situation is worrying though.

  • Comment number 38.

    Stephanie, you may well be breathing a sigh of relief but I suspect that many of your colleagues within the newsroom are bitterly disappointed!
    The whole tone of the feature that preceded the announcement of the actual figures was so negative that it could have come straight from Labour party headquarters. The economists quoted were obviously chosen for their negative views rather than their independent expertise.
    Thank you for a more balanced view.

  • Comment number 39.

    I see the more disingenuous of the left are now claiming that these decent figures have nothing to do with the coalition and are all the result of Labour's past work. But does anybody really believe that had the figures been bad, the hypocrites would not have not jumped at the chance to blame them om the the coalition policies? And now they are telling us it could take 18 months for the cuts to take effect. If true, this would be just at the time that, had Labour stayed in office and continued spending and wasting more money this year with the national debt mounting to astronomical levels, Labour's cuts would then have needed to be much deeper and much nastier. Brilliant!

  • Comment number 40.

    Growth in 'financial service'...mmm
    What you really mean is the banks are greedily sucking cash out of every other business in order to build up huge profits to pay massive bonuses.
    This isn't real growth. In fact it really is a bigger brake on growth than any government policy.
    Look at the lack of growth in manufacturing - the only place that MAKES money instead of recycling it.

    Then of course there is the fact these are government numbers. We ALL know about them don't we - we've been living with 2, 3 sometimes 3.5% inflation while the prices of meat, veg, milk, butter, houses, council tax, taxation in general, government fees, council fees... have all been going up between 5 and 50% a year (in the case of milk its certainly more than that in the supermarkets - despite the fact they are actually paying less for the milk than a year ago - ooh, did someone say cartel?)

  • Comment number 41.

    38. At 2:05pm on 26 Oct 2010, Tradetalk wrote:
    Stephanie, you may well be breathing a sigh of relief but I suspect that many of your colleagues within the newsroom are bitterly disappointed!
    The whole tone of the feature that preceded the announcement of the actual figures was so negative that it could have come straight from Labour party headquarters. The economists quoted were obviously chosen for their negative views rather than their independent expertise.
    Thank you for a more balanced view.
    ----------------------------------------------------

    This is classic reporting. Precede an announcement by trailing a poor result. Release figures that are not so poor to mediocre.
    Blow trumpet about better than expected figures.

    Understand the process!

  • Comment number 42.

    Everybody needs to read, "The Grip of Death", by Michael Rowbotham, and then all will see why Ms Flanders, as well as every other 'economics editor' and 'business' "expert", especially those that make 'breaking news' announcements [Lloyds takeover] on the morning news to manipulate the markets, and launder their 'kickback' into untraceable accounts for doing so [eh, Bob ;-)], all need to go and get other jobs, 'cos they sure don't understand economics!

    Reporting totally meaningless figures, and quoting phrases which have been imprinted into their psycho-susceptible brains, merely emphasises their ignorance, and how these frontmen/women are used by Government to keep the lid on the, presently close to bursting, pressure cooker.

    Read Rowbotham's masterpiece...

    Max

  • Comment number 43.

    Stephanie or someone else please correct me if I'm wrong but my understanding is that GDP growth is calculated by taking a random stratified sample of output across the various sectors of the economy compared to the sample from the previous quarter, then minus the CPI inflation calculation for the current quarter?

    If this is the case the problem I see is the use of CPI as a valid indicator of real inflation for both individuals and businesses. My business and personal cost increases certainly have borne no relationship to CPI ever in the last 17 years. This is also the case for all others that I know in business and personally. CPI woefully underestimates real inflation in my opinion. Therefore GDP growth is over-estimated and might account for why I and others seem to have worse cash flow personally and in business when we are supposedly seeing GDP growth.

  • Comment number 44.

    So it's not all bad news, though according to the ex postie the government's doing it all wrong. Now he's full of advice on what they should be doing ; it's just a pity he didn't have this superior knowledge when he helped prop up the worst example of government economic incompetence this country has ever suffered . The temporary Labour party leader also seems to believe that the slight recovery is also due to Labour incompetence, but then he isn't quite sure what's going on around him anyway.

  • Comment number 45.

    Wow, that was a surprise after just about everyone saying only 0.4% growth, economist here even says recovery is better than in early 1980s . Surely that puts QE very much on the back burner...

    http://www.mindfulmoney.co.uk/2087/economic-impact/strong-uk-growth-keeps-qe-at-bay.html

  • Comment number 46.

    Stephanie Flanders has the mind-numbing habit of starting paragraphs with the word 'interestingly' which appears to escape the attention of the sub-editors. I think we can assume that it is 'interesting' Stephanie, because you wouldn't be writing about it otherwise. She also answers a rhetorical question with this response 'The honest answer is that we don't know.' It's never a good idea to set yourself up by admitting ignorance on a subject. The reader might wonder what you are being paid for. And who is we anyway? The BBC? You can't be speaking for me because maybe I do know.

  • Comment number 47.

    Hmm a sobering analysis.

    So this lag is basically due to the previous Govenrments policies.

    Appears to be a very strong Construction led growth. Could this be to do with Public building iniatives that were funded by the previous administration.

    I would say to the Coalition, take note!

  • Comment number 48.

    We have now had two quarters of what on the face of them are very good GDP numbers. Rather oddly this blog comments.
    "The lurking fear, in these numbers, can only be that the UK is behind the curve."
    How exactly are we behind the curve?As surely we are ahead of these countries and perhaps our attention needs to turn to the possible dangers ahead including the subject very rarely mentioned on here that of inflation..

  • Comment number 49.

    "44. At 2:46pm on 26 Oct 2010, kaybraes wrote:
    So it's not all bad news, though according to the ex postie the government's doing it all wrong. Now he's full of advice on what they should be doing ; it's just a pity he didn't have this superior knowledge when he helped prop up the worst example of government economic incompetence this country has ever suffered . The temporary Labour party leader also seems to believe that the slight recovery is also due to Labour incompetence, but then he isn't quite sure what's going on around him anyway"

    Can you not read? Or do they not teach that in Tory Madrasa's?

    This recovery IS due to the previous administrations policies. THIS administration has done nothing so far to elicit the growth. In fact all fingers point to the Coalition policies pushing the Economy the otherway.

    As for the "Postie", well at least he's had a real job, unlike Gideon and PR Man!

  • Comment number 50.

    "So, there's no doubt that the figures tell us good news about the recent past."

    Reporting ilke this really annoys me and shows absolute naivity to the situation. Where is the in-depth critique? "Construction up 11% on last year"...a small or normal real world increase from a reduced base will always look big. I can increase my toast consumption each morning my 400% if I wanted - it would still only be 4 slices of bread though.

    Just look at the GDP predictions...expected 0.4%, revised to 0.8%...so economists were collectively 100% out and they're the experts! My stat doesnt really give the right picture but it certainly could be used by some to make the argument that economists/analysts aren't very good at their job!

    "UK economy is now 2.8% bigger now than it was a year ago."....anything to do with unsustainable QE do you think??? Not particularly comforting then, is it.

    "There is still plenty to worry about in this recovery"...Mervyn King has come out saying "Of all the many ways of organising banking, the worst is the one we have today."...if we are running banking in the worst way possible, how on earth can a recovery begin to take shape without artificial 'growth' or serious cost to recify banking in any meaningful way?

    You simply can't have anything in its worst state, do anymore than produce the worst product or assume that the cost fixing it won't discount the improved result for a long time.

  • Comment number 51.

    Interesting that over 10% of posters are here for the first time and of those 100% attack either Stephanie directly or any suggestion that today's figures are anything but good.

    Muuum you can interprit what you like from that

  • Comment number 52.

    If these GDP figures are to be believed we must get interest rates up as inflation is a real and substantive problem that must be tackled urgently.

    To argue that we must have more QE against this set of figures is bordering on insane. Or perhaps those arguing for prolonging the irrational economic management of the price of money do not believe the figures?

    What is absolutely certain is that it is intellectually fraudulent to want it both ways. You can a recover, but if you have recovers inflation must be tacked. If you don't have recovery then keep rates low and have more QE.

    If Mervyn King and the ship of fools (sorry the MPC) believe these figures then interest rates must start rising to tackle inflation and they must start rising now, before Christmas.

  • Comment number 53.

    re BBC bias
    Agree totally, the BBC has a trmendous problem with lack of balance in all areas of its broadcast. It is very leftwing, it is also totally apple biased in any technology coverage (even naming its own replay mechanism after apple products), its unable to cover anything but the arts with any depth (listen to radio 4's 'today' news program - today covered some painting of ex-mps amongst other things which are clearly not news, yet skips over news worthy items at a depth that would makes the Daily Sport look well thought out and indepth).
    The BBC is a total waste of money these days and would be better off shut down immediately, I'd certainly rather see us keep the Harriers and aircraft carrier.

  • Comment number 54.

    Stephanie,

    Why don't you mention the encouraging performance of manufacturing?
    You say that after construction, the "strongest sectors" were distribution/hotels/restaurants (+0.6%) and business/financial services (+0.5%).
    Manufaturing posted stronger Q3 2010 growth (+1%) than any sector bar construction and has just had its best 12 months of growth since 1994 - up 5.3% since Q3 2009 compared to 2.8% in business/financal services and 3.2%. Admittedly this is partly reflects the severity of the downturn in the sector during the recession, but I think you underplay the contribution manufacturing to growth this year.

  • Comment number 55.

    There are a lot of BBC bashing, whistling in the dark supporters of 'balanced budgets' and other 1930s orthodoxies behind some of these remarks. The (sadly soon to die out) improvement in economic growth reflects the strong financial support of the ailing economy by the previous government when the then Tory opposition thought the recession should 'run its course' without state intervention.The cuts in public expenditure recently announced will reduce aggregate demand and so, investment,employment and economic growth very significantly.This isn't left wing propaganda but simple macro economic reality.

  • Comment number 56.

    Re Update, 1503:

    It is very strange that the graph for the current recession is a smooth curve compared to the other three.
    Is this a sign of recent statistical massaging?

  • Comment number 57.

    53. At 3:27pm on 26 Oct 2010, anotherfakename wrote:
    re BBC bias
    --------------------------------------------

    Apply for a job with the BBC and change it from within. Let us know how it goes.

  • Comment number 58.

    Can someone explain the difference between a cut and a saving

  • Comment number 59.

    There is only one true measure of economic recovery, not gdp figures or I told you so politicians, ITS JOBS,JOBS JOBS.

  • Comment number 60.

    Excellent news!! Please put interest rates back up to 5% now then.

  • Comment number 61.

    Remember the stimulus? Bureaucratic lag, the cumbersome process whereby governmental agencies skim money off of the top of allocations and proceed with their painful process of distribution and identification of applicants with political connections. The election slowed everything down as a new list of the faithful needed to be established. This all takes time. I would guess that the funds of two years ago are finally showing up. The financial services increase is related to the continued extortion facilitated by the government. The political and their friends are doing fine....the rest are waiting to find when the bottom will finally be found. Through the Looking
    Glass.

  • Comment number 62.

    49. At 3:15pm on 26 Oct 2010, ToriesBrokeBritain wrote: "This recovery IS due to the previous administrations policies."

    OK, so if this recovery is due to the impeccable policies of the long lamented previous administration, did they also cause the bust as well? Bet you don't claim that as well?


    "THIS administration has done nothing so far to elicit the growth. In fact all fingers point to the Coalition policies pushing the Economy the otherway."

    Well so far the Labour mantra has been the recovery is being imperiled by Coalition policies because growth is not yet established. How much growth do we need before the economy is sound? The best 3rd quarter for 10 years seems a good starting point, does it not? And we seem to tracking in a similar way to previous recessions, perhaps the risk is not quite so serious?

  • Comment number 63.

    #53. Rubbish post from beginning to end.

  • Comment number 64.

    Hhm. Odd. I was on this website last night, and there was an economics item about the performance of Britains economy over the last quarter, or half I think.... and it didn't remotely accord with this news item. The basics of it were that the recent past's positive growth figures were an illusion.., a bump/jump after an extremely deep recession.

    Now this morning, it seems to have disappeared, replaced by todays headline. Rewriting of the news?

  • Comment number 65.

    To believe the GDP figures - these or any others - you have to believe that the calculation is accurate, particularly where inflation adjustment is concerned. In the US, growth figures are massively flattered by understated inflation, something which is shown up by highly reliable independent sources - can we be sure that the same doesn't apply here, too?

  • Comment number 66.

    It's good that the some of the people on here are aware of the subtle (and sometimes not so subtle) biases of the so called 'impartial' BBC, although admittedly Stephanie is not as biased as some other commentators.
    This shouldnt be a suprise for people though, the BBC is a public sector institution and has done very well for itself under labours stewardship. Now the coalition government is in power and the BBC is facing cuts in real terms. These factors no doubt lead to a culture which makes objective reporting difficult.

  • Comment number 67.

    The new economy figures can only relate to what the previous government put in place - the coalition had no time to influence the economy so shortly after coming to power, so the real question is WHY has growth held up?

    The answer lies in Alistair Darling's stimulus package which brought forward capital projects in response to lobbying by the Construction Industry who said it was essential to keep the 300,000 building workers from becoming unemployed.

    That package is now ending - as are the Olympic construction projects - and the combined effect of central government axing projects like the Defence Academy at St Athan, along with the capital spending collapse now happening in local government, plus the halving of social housing investment will see up to another 500,000 building workers joining the dole queues shortly.

    Add in 500,000 civil servants plus another 500,000 private sector jobs directly dependent on Government procurement and we are headed for a perfect storm of rocketing unemployment, falling tax revenues and a rising welfare payments bill.

    Given the state of our export markets and what looks very much like a collapse in consumer spending any moment as well as house prices now firmly on the slide, it seems to me to defy logic to go on having such a rosy view of the prospects for growth.

    The OBR is completely at sea over the multiplier effect of taking £120 Bn out of the economy - they quote a range from -1.3 to +4 - or more - so on this range the effect on aggregate demand in the UK could range from +£160 Bn to -£480 Bn.

    Tinkering with marginal rates of corporate taxation and twiddling with regulations is NOT going to lead to 2.7M new jobs, industrial investment of £400 Bn and an increase in exports up by a third over this parliament.

  • Comment number 68.

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

  • Comment number 69.

    Glad the GDP figure doesn't show a downward trend.....whoops!

    Are there any journalists worth their salt?

    "But if you look through the quarterly ups and downs, today's preliminary estimate suggests that the UK economy is now 2.8% bigger now than it was a year ago. "

    What about the 7% of GDP that was added to the economy through the last round of QE Stephanie? - or have you forgotten GDP is a monetary based figure

    The Economy hasn't grown - the money supply has and there is still some residual aggregate demand from the huge subsidies handed out to the car industry and the banking sector.

    It's terribly sad to see how all this is quickly forgotten in the rush to be the first one to claim "I can see green shoots"

    I mean haven't we all learnt our lesson by now?

    http://news.bbc.co.uk/1/hi/uk_politics/7828549.stm

    It's only ends with egg on face...

  • Comment number 70.

    Hi Sandy

    Stick to the facts and not, maybe or could be. ie 'if the figures were bad then....etc'. Many say that Gordon Brown mitigated the effects of the WORLDWIDE financial crisis! Time will tell as to how the coalition governments cutbacks will present themselves?

  • Comment number 71.

    In Robert's end of year blog for 2009: http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/12/unstable_equilibrium_in_2010.html#comments

    39. At 10:26am on 31 Dec 2009, onward-ho wrote:

    2010 will be the year the economy grows at over 3%.
    2010 will be the year the public finances start to look better than predicted.
    2010 will be the year the bad debts the government guaranteed will turn out to be not so bad and the government will make a profit on it!
    2010 will be the year the pound regains ground on the Euro.



    And everyone thought I was a loony.

    Mind you I thought we would have a joining the Euro referendum.
    Maybe there will be a European taxation levy referendum instead.
    I also thought we would get cashback from Iceland.
    Hope springs eternal.

    However, with every percentage in GDP growth improving government income by 5%, it looks like Darling and Brown were spot on ...... they managed to implement 90% of the cuts without us noticing, yet set the scene for growth ......but this new Dim and Dimmer lot blame Labour for taking the action that brought about the very same recovery that is saving the Coalition's bacon.
    But the worrying thing is that with this new doom squad in power, the feelgood factor is conspicuously absent because they are such a depressing and mean-spirited shower.
    AN ECONOMY GROWING AT 3% SHOULD NOT BE SLASHING PUBLIC EXPENDITURE AND CURBING THAT VERY GROWTH BY SHELVING INVESTMENT IN INFRASTRUCTURE AND PUBLIC SERVICE.
    With a normal-service resumed lending culture ,construction cranes swinging and an open-minded and welcoming approach to immigration again,and a realistic approach allowing banks to do what they are good at, ie lending and supporting growing businesses and families....
    there would be no stopping Britain thriving.
    Can Dim and Dimmer see the light and ever so quietly and gently shelve their silly out-of-date slash and destroy Viking approach to managing a modern mixed economy?
    We need decent, big, thriving banks .....now is not the time to shoo the successful ones away, nor is it the time to smash them up or sell them off too cheaply, too quickly.
    Are we recovering in spite of government efforts,and if so will we continue to ignore the negativity, and confidence-bashing which they are inflicting on the country?

    I live in hope.

    Let's not let these twits get us down!

    Wanna convert a barn, open a shop, send your kid to Uni, get married, raise a family, plan a future?

    Never mind the horrors in power, just do it!

    If we all do it, we will thrive.

    But if we sack our neighbours, if we neglect our old, if we don't help young people to study , if we don't help young go-aheaders raise their children,if we reverse the recent reductions in crime by slashing police budgets, if we stop supporting people getting a fair trial,if we close our libraries, and stop learning-disabled children getting specialised help, if we stop inspecting restaurants and workplaces, if we let Murdoch take over the BBC, if we let this Tory retro-fest vandalise everything that is good about this country.........

    Surely we won't will we?

    What's to stop them?

    Only us.

    Have you ever written to your MP?

    Have you ever gone on a demo or a strike?

    Do we have to?

    Do we have to wait until it is our job, our kids, our grans, our friends
    ......... who are thrown on the scrapheap?
    Do we really want to see 200,000 skint Londoners evicted this year?
    Great progress and cardbox city here we go again.

    Thankyou Libdems, you are doing more harm to this country than any foreign terrorists ever could.
    Though you did not tell us you would, did you?
    As for the Tories, well whadya expect, they are Tories .

    Who simply do not care tuppence for anyone who is down on their luck.

    Tough totty is hilarious until you are the totty.

  • Comment number 72.

    I enjoy reading these blogs because it gives modestly educated readers like me an insight into the performance of the UK and Global economy.

    What I do find disappointing though is the constant right wing propaganda and Mailesque BBC bashing.

    Please give it a rest and let me and others enjoy the debate.

  • Comment number 73.

    66. At 4:24pm on 26 Oct 2010, The_Juice wrote:
    It's good that the some of the people on here are aware of the subtle (and sometimes not so subtle) biases of the so called 'impartial' BBC, although admittedly Stephanie is not as biased as some other commentators.
    -------------------------------------------------

    When assessing any news and opinion provider for bias you must remember that the first task is to be completely honest about about your own bias.

    If you believe that The Guardian (or Telegraph) is not biased because it fits your view of the world then you need a little philosophical thought before continuing. To define bias there must be an agreement on where the middle ground is to be found. This is very difficult if you do not agree where this middle ground lies as that defines your bias as well as those you accuse of bias.

    The only way around this is to accept (even insist on) a pluralist press and ensure you are well read.

  • Comment number 74.

    The Governement and their henchmen can say whatever they like on the state of the economic recovery.

    However, it is interesting that they are using Labours figures in conjunction with what was agreed by the Treasury prior to the election when it comes to sorting out what is and is not cut.

    I'll believe the figures if the economy continues to grow. I hope I don't have too long to wait.

  • Comment number 75.

    Where are the jobs going to come from?

    In my view (acknowledging those above who have expressed similar views) the jobs will come in science, engineering and creative industries. A laissez faire economy, a love for individual liberty and an open view of the rest of the world has its down sides. But it is precisely those aspects of our society that will produce the jobs of the future.

    It is individual ideas and personalities that will create jobs. We are world experts at that. It was precisely that attribute which produced the disastrous "innovation" in the City. We need to let loose precisely that individuality in the "real" industries.

    The Government is trying to do its part. Many commentators will be watching the UK experiment - succeed or fail it will be debated constantly across the world. The otherwise rather stiff Economist even declared them "radical" (Cameron has to do the mohawk at his next fancy dress!)

    Two further thoughts:

    1. If I were Mr Cameron I would be appointing my wife to a prominent and wide ranging role. I reckon, at least in certain sectors, she knows far more than him about building British companies and British brands. It would also be good for his "new conservative" credentials.

    2. If I were Mr Miliband I would be finalising my policy on cuts and taxes - being a bit more compassionate, a bit more green and a bit harsher on the bankers. I would then get onto the debate about how to build a sustainable economy. That is a space where he can create a new new labour and his own positive voice.





  • Comment number 76.

    Hopefully we will be able to get rid of the structural deficit and secure more trading partners inside the EU, Russia and China as well as South America and the Middle East while taking a step away from the toxic economy of the United States before their currency collapses, minimising the economic effects we will suffer from their eventual and inevitable collapse.

    I just hope our Government are wise enough not invest anymore money into the American financial system, its a toxic waste factory that is about to blow up, contaminating economies worldwide, businesses in this country would be wise to get out while the goings good and get rid of anything associated with the US financial system while it is still worth anything.

    Businesses here should invest in precious metals, oil and anything that is tangible and to stay well away from derivatives, credit default swaps and anything else to do with the Casino financial system Americans have created. For the sake of this country we need to start hording real assets now to safeguard the survival of our civilization from the greed and recklessness of Wall Street.

    People personally should not bother saving money in fiat currency since its value continues to fall due to extremely low interest rates and quantitative easing programs and should buy Gold and even silver if you want to maintain the value and even increase the value of your savings, Gold and silver is going up in value all the time and there is no sign its going to stall anytime soon, so to anyone who has any savings in fiat currency, exchange it for gold, silver or both and invest in stocks such as oil, gas, and mining stocks and even agricultural stocks, anything that is real and not just worthless tinkering of Wall Street such as derivatives.

    I hope this advice helps someone, seriously do some research on the Global Economy and find out how to weather through these tough times. Even though things are tough there are still so many opportunities out there to grab a hold of. There is more going on in the world than you realise, please believe that at least.

  • Comment number 77.

    @49 - ToriesBrokeBritain

    You lack understanding of the current finicial crisis.

    Although the current financial crisis was caused by the banking system collapsing it was labour's policies of tax, spend and borrow and borrow and borrow and borrow that took this country beyond its means.

    Also had the previous labour government had not been so careless with the economy prior to the financial crisis happening then we would have been in far better shape to withstand the current situation this country finds itself in.

    The amount of interest this country is having to pay on the money borrowed by the previous government means that for many years we will be having to pay off the debt incurred.

    No government should make the mistake of making the state an economic driver to build the economy - in other words the state got too big. Because Labour allowed this to happen this is why you are seeing so many public sector workers being made redundant over the next few years - the government can't afford to pay them.

  • Comment number 78.

    Why does the BBC continue to talk the country down.Every news or political programme goes out of its way to degenerate any good news about our economy.Methinks it hates this government for threatening to cut the disgracefully overpaid workers.There is more money wasted as perks by the BBC than the MPs scandel but you wont be told about it.

  • Comment number 79.

    69. writingsonthewall:

    "What about the 7% of GDP that was added to the economy through the last round of QE Stephanie? - or have you forgotten GDP is a monetary based figure"

    Very true - and not mentioned anywhere in media reporting of this data, as far as I can make out.

    During 2008-09 and 2009-10, government injected 14% of GDP through QE and 18% through deficits, so that's 32% of stimulus in two years, or 16% per year. That makes annual "growth" of 2.8% look pretty paltry, doesn't it?

    One way to look at this, of course, is that even more stimulus is needed. But the more radical approach would be to conclude that stimulus doesn't seem to work as it used to, and to ask why.

    One reason is deleveraging. Individuals, businesses and banks are reducing their debt exposure, so any government stimulus simply gets transferred to private balance sheets rather than boosting consumption.

    Essentially, also, the private sector is burdened, not so much financially (though the tax burden is a problem) but rather through excesses of regulation. Have the planning, HSE and 'equality' regulatory structures now become so bureaucratic and zealous that business finds it difficult to expand?


  • Comment number 80.

    Do you think it possible for you to tell us where the deficit money is going? We hear every day about the billions we owe as a nation, but who are we paying it back to? I have an idea it's to a computer in South Shields, but I may be wrong.

  • Comment number 81.

    The lag in growth is the result of policies implementted by the previous government - the coalitions policies will not have filtered through to output as yet; as Stephanie says in our real world of high streets and labour markets we see little signs of growth. House prices are still falling and lots of new construction orders are on hold or cancelled.

    ========================================================================

    What are you talking about?

    Osborne borrowed and spent more from May-October 2010, than Darling did in 2009 over the same period. Consierably more.

    The debt, deficit, spending and borrowing has gone up. Not down.

    The only reason growth remains is that Osborne hasn't implemented his own spending and cuts plans yet.

    They won't come in until 2011.

    Economists forecast 2011 growth to be less than 0.4% for nearly 3 years

  • Comment number 82.

    " I really don't understand why journalists appear to be keen to talk us into a further recession"

    Because they're not the tory press office?

    Basically everyone from economists, to city traders, and expecting growth to plummet not in 2011 when the cuts happen, but probably in the last quarter of 2010.

    It's not if but when.

    Osborne has increased borrowing and spending since being in office. He's had to to keep the country afloat.

    That's your record growth. Not his own spending plans

  • Comment number 83.

    "If we get two or three more quarters of reasonable growth numbers will those forecasting doom and gloom admit their errors?"


    Growth has dropped 30% in a single quarter, since the budget?

    It will continue dropping.

    What's to be happy about?

  • Comment number 84.

    "It's good that the some of the people on here are aware of the subtle (and sometimes not so subtle) biases of the so called 'impartial' BBC, although admittedly Stephanie is not as biased as some other commentators."
    =========================================================================

    Tories tend to work on the basis that any deviation from the party line is bias.

    Have you ever considered the fact that it's the government version that is possibly partisan?

    Think about it for a few minutes and get back to me

  • Comment number 85.

    #39
    "I see the more disingenuous of the left are now claiming that these decent figures have nothing to do with the coalition and are all the result of Labour's past work. But does anybody really believe that had the figures been bad, the hypocrites would not have not jumped at the chance to blame them om the the coalition policies? "

    I think I could rewrite this to say something like,

    " I see the more disengenuous of the right are now claiming that these decent figures have nothing to do with the Labour party and are all the result of the good work of the coalition. But does anybody really believe that had the figures been bad, the hypocrites would not have jumped at the chance to blame them on Labour's past policies."

    After one round of the new game show 'Claim and Counter Claim' my guess is that the reality is somewhere in between these two statements.

    Round 2. Steph is a biased lefty?
    Answer; No. The job of a reporter is report the facts. The job of the economic editor is to give some background to the news. In this particular case she has identified possible problems ahead. I am not so naive to think that everything is going to be perfect from now on. I want to know what the the pitfalls ahead are. This is not being anti coalition. In fact I hope that the coalition are doing the same. The unspoken failure of the Labour years was the failure for much of the time of the then opposition and much of the media to challenge Gordon's economic policy and the running of the banks.

    If a position is challenged and its supporters consider the challenge they result is a stronger position even if it is unchanged. After all that is what a Devil's Advocate's role is.

  • Comment number 86.

    This isn't good news. It's less bad than we expected. But still bad.

    Growth has dropped 30% in a single quarter. That's a heck of a lot. Not a disaster, but not great.

    Since May Osborne has largely been continuing Labour spending plans. With both more borrowing and state spending.

    This isn't his fault, as he has to ease the country into fiscal cuts, and can't do it all at once, but claiming this growth is anything to do with him is ludicrous.

    He's continued spending, and he's got growth. Labour's basic position. If it was up to them, they'd continue this right up until the end of 2011 and start from maybe a 2-3% growth figure?

    The numbers are a bit misleading. Building companies rushed through contracts before Osborne got into power. A lot of them state. Rushed through deals. This is sort result. A little spending bubble that's about to pop.

    Most other sectors are going downwards. Not upwards. Construction will follow by the next quarter, as Osborne is slashing capital spending.

    I was watching the city today, and they still expect a 0.4% figure in the final quarter, so we'll be having the opposite argument then I imagine!

    In the longer term, they expect growth to fall under 0.4% consistently for the next 2-3 years.

    Long sustained low growth. Which is where the danger comes in.

    If you're running an economy with high unemployment, high inflation, and only say 0.3% growth, it won't take much to tip you into recession


  • Comment number 87.

    "Do you think it possible for you to tell us where the deficit money is going? We hear every day about the billions we owe as a nation, but who are we paying it back to? I have an idea it's to a computer in South Shields, but I may be wrong."

    =========================================================================

    Rich countries and hedge funds buy Gilt bonds in poorer countries.

    This basically means that they hand over a HUGE amount of money to the UK, and in return the UK has to pay them back in say 20 years, with interest.

    The UK isn't bringing in enough revenue to cover it's expenses, so has to sell bonds in itself (borrow) to cover the gap.

    The deficit basically means they are paying back this money.

    The UK has been doing this for 60 years, consistently, so debtors are contiuously calling in their money.

  • Comment number 88.

    I see the more disingenuous of the left are now claiming that these decent figures have nothing to do with the coalition and are all the result of Labour's past work. But does anybody really believe that had the figures been bad, the hypocrites would not have not jumped at the chance to blame them om the the coalition policies? "

    =========================================================================

    Osborne hasn't even finalized what his spending plans are yet?

    Debt has gone up since May. As has borrowing. As has spending?

    If the current spending levels are Labour's fault, so is the growth

    You can't have both unfortunately

  • Comment number 89.

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

  • Comment number 90.

    14 S F

    The UK exports more to Portugal than to China. I'm not sure that is an achievement or a failure.

  • Comment number 91.

    88 mike

    You always see a rebound, nothing to do with politics, a drained supply chain restocking, deferred purchases implemented. Calling it growth is dubious.

    So if its nothing to do with politics you can have it both ways if all anybody wants to do is try to relate politics to it.

    There is relentless scaremongering from both sides.

    Where it get real is if you have to borrow and the lender is concerned about your capability to repay.

    If you have debt you are not independent.

  • Comment number 92.

    Good news on GDP; generally for the goondog billionaire import sucking monopolists and multi nationals.

    The rest of the UK is either in 'recession' or in 'depression' as depending on sector and/or location.

    Vince Cable is yet to create a single British job for a single British worker ... and he said yesterday that he has no money to do anything himself ... but at least he nearly 'shut up' about importing more immigrant workers.

    Perhaps GDP can be split and broken down so as to show what is really going on with the British economy i.e. domestic economy - v- globalised section of the former British economy.

    BTW - GDP does not exist in the UK ... we only have 'GIP' ... 'Gross Internationalised Product' (or 'Goondog Internationalised Product' for the 'more enlightened').

  • Comment number 93.


    4 reasons not to be cheerfull.

    1. The cuts have yet to bite.

    2. Growth is usually followed by a rise in interest rates.

    3. A large component of the growth is in construction rebounding from a very low base.

    4. The banking system is dysfunctional.


  • Comment number 94.

    Forgot to mention.

    If the cost to the taxpayer of the 2008 bank bail outs are added to the current UK national debt along with the hidden UK debts on e.g.

    public pension black-holes
    UK public and private infrastructure
    higher future energy, food, import costs

    The UK is currently about £4 Trillion in debt, overall, according to recent estimates.

    The differences between the UK's political parties in terms of policy are very small indeed and are infact dressed up and pumped up by the media into a huge non-existent difference of positions. Obviously, the Coaltition govt is facing up to the problem as best it is able to do so.

    However, the underlying fact is that Britain's underlying debt and deficit problems and British govt spending generally are increasing (and notwithstanding the Coalition's govt's efforts and best intentions) ... are still set to increase further going forward.

    The position where Britain's strategic, macro-economic direction is largely controlled by the triangle of despair ... goondog billionaires ... banks and spivs, gamblers and the ... 'vested self interests'... has to be addressed by funadmental constitutional, and strategic and other radical reforms.

    Some may think there is growth ... and there is strong growth ... but it is within what is the super privileged 'triangle of despair' for the real UK economy.

  • Comment number 95.

    By current measures a fall in GDP. The economy is therefore slowing, albeit evidence, at present, of some growth. Let us pronounce judgement on this coalition's policies a year from now. For the sake of this great nation, I hope that I am wrong, but I forecast minimal growth in 2011, and significant social unrest to boot. Politics aside, if you are a 39-year-old wallpaper heir, with no idea about the severity of the impact of the downward multiplier, and the social upheaval you are encouraging in what was, once, a tolerant society, with your chosen policies, then the future is going to be held squarely at your door in 12 months' time. I, thankfully, did not vote for this. Be warned, England, the worst is yet to come. If you remove demand from the economy, the economy is dead.

  • Comment number 96.

    73. At 5:02pm on 26 Oct 2010, Kit Green wrote:

    When assessing any news and opinion provider for bias you must remember that the first task is to be completely honest about about your own bias.

    If you believe that The Guardian (or Telegraph) is not biased because it fits your view of the world then you need a little philosophical thought before continuing. To define bias there must be an agreement on where the middle ground is to be found. This is very difficult if you do not agree where this middle ground lies as that defines your bias as well as those you accuse of bias.

    The only way around this is to accept (even insist on) a pluralist press and ensure you are well read.

    -------------------------------------------------------------------------

    I completely agree, and i appreciate the difficulties in presenting material in an impartial way. It is for this reason that I try to attain material from both centre-left and centre-right wing sources (to get both sides of the story as it were). Whilst doing this I noticed that the way the BBC presents it's material in terms of content, structure and language bears more similarity to the left wing material which I read.

    Turning to your last point, from my experience in dealing with the general British public i'm not confident that a majority of the population is well read and this makes any bias in the BBC (or other major broadcasters for that matter) all the more concerning. I just feel more could be done by the BBC to ensure objectivity is maintained.

  • Comment number 97.


    Given that policy takes 12 to 18 months to work its magic perhaps the plaudits belong to Brown / Darling for softening the worst of the recession with a stimulus.

    All downhill from here. One piece of news that will please Nautonier ( :) ) is that the private sector is very good at creating jobs for foreign workers primarily because the under invested and under R&D'd private sector struggles to grow the high skill end of the economy.

  • Comment number 98.

    94. At 8:03pm on 26 Oct 2010, nautonier wrote:

    The differences between the UK's political parties in terms of policy are very small indeed and are infact dressed up and pumped up by the media into a huge non-existent difference of positions.
    --------------------------
    In some ways this is true. The main parties operate within a media permited narrow bandwidth.
    On the other hand though. Some differences in policy however small will have a huge impact on hundreds and thousands of low income earners. The coalitions cuts which target the lowest earners and most vunerable in society disproportianately, shows how. Being say £30 a a month worse off for example may be the difference between survival and devistation for many. To oppose this is definately not a non-existant position. Especially if its you on the breadline.


  • Comment number 99.

    Osborne seems to want to tell us we were bankrupt one day and he saved us all with his (totally politically driven) £6bn of initial cuts back in June. Then he says oh dont be silly we're not bankrupt and these cuts of ours wont be so bad, look they're pretty much like what labour would have done (even though he then complains the opposition Labour won't tell him what they would have done - welcome to Govt). All total poppy cock. As pointed out in other posts pretty much all the economy short term stats are a reaction to Labour's attempts to push the economy back into growth, including the continued high level of borrowing requirement (£16bn in September). Next year sometime we will see impact of Torylition policies - who knows, but personally not very confident. Making lots of people unemployed and reducing benefits while hoping for some magical private sector safety net miracle doesn't seem very likely to me over the next couple of years. Emminent economists seems a bit of a misnomer these days, but if we give the nobel prizewinner a short honeymoon he seems to think Govt policy is very much not the way to go.

    QE has contributed a lot to the expansion in GDP over last year and we will need to pay for that sometime. Inflation already looking a wee bit scary and interest rates must start to go up sometime soon. Successive 4 or 5 year governments have pushed up debt levels as a nation since 1992 (apart from Blair mark 1, and in %age terms the worst offender was Clarke/Major - check the Treasury stats, easy to get) - its time to somehow try and stabilise this but regardless of politics I dont envy anyone the job, Tory or Labour.

  • Comment number 100.

    The blog we are commenting on is (volens nolens)being an educational tool, as well as a piece of social engineering. Given the experience of last years it might be the best policy for now to underestimate the growth. It will keep some credit cards deep in the pocket and it might help to keep some people under a decent roof over their head as well. The left of centre and right of centre perspective is “one interest, different sensitivity”. In a country with real wealth distribution far enough from the statistical one (the latter being as it is) knowing these two opinions hardly seems enough to imagine where the real vector of social tensions might be pointing.

 

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