Archives for April 2011

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).

Forecasting more inflation

Andrew Neil | 20:41 UK time, Tuesday, 12 April 2011

On March 31 this Blog claimed that the "retail boom is well and truly over". And it is -- with a vengeance.

Retail sales in March were down 3.5% on a like-for-like basis and almost 2% down overall. Both figures are the worst in recent memory. The later Easter is a factor but not the most important one.

The retail slump is almost certainly the result of the current vicious squeeze in living standards (see past Blogs). Since that is set to continue for the foreseeable future retail sales are likely to be in doldrums for some considerable time.

Two brighter points, kinda. Inflation surprisingly dipped in March: the government's favourite measure the CPI by 0.4% (to 4% -- still double the official target) and the public's more relevant measure the RPI by 0.2% (still leaving it over 5%).

The fall is largely due to food prices coming off recent highs. But the inflation trend is still up and there is still every chance that the CPI will reach 5% before the year is out. City forecasters, who were caught short by the March fall, still see more inflation to come.

The other bright spot is unqualified good news: exports are up 15% year on year. With British consumers going on strike the economy badly needs an export-led recovery or there will be no recovery at all. Too soon to talk of anything like a German-style export boom.

But at least exports are moving in the right direction.

Not available for service

Andrew Neil | 16:14 UK time, Wednesday, 6 April 2011

Mea Culpa! Today I suggested to Defence Minister Nick Harvey, when he didn't seem to know the whereabouts of HMS Illustrious, an aircraft carrier, that it had been mothballed and was therefore unavailable for Libya.

I was wrong: it's not in mothballs. But it is unavailable for service.

Illustrious has been in Rosyth, Scotland since February 2010 for a £40m refit. It won't be completed until August at the earliest and after that will need to undergo sea trials. In fact, Mr Harvey's ministerial colleague Peter Luff told the House of Commons on 14th March this year that HMS Illustrious is scheduled to return to operational service in spring 2012.

And when it is it will no longer be able to carry fixed-wing aircraft: just helicopters.

Mr Harvey was unable to tell us any of this when he was on the show. But with Illustrious out of commission (for conversion) and HMS Ark Royal with a "for sale" sign on it on an MoD website, there are no aircraft carriers that Britain can deploy in Libya or elsewhere for the foreseeable future with fixed-wing aircraft.

Mr Harvey said there was nothing new about this: that fixed wing aircraft had not flown off a British carrier since 2003. Probably best that I refer you to the comments section of the Daily Politics website, where our viewers provided convincing and substantial testimony that Harriers were flying of British carriers as late as 2010 - but cannot now.

Click here to watch Andrew and Nick Harvey on Wednesday's Daily Politics.

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