Good news on GDP
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.
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.
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.