Is the UK economy looking up?

Workers at a UK car factory Image copyright PA
Image caption The UK economy appears to not be doing as badly as some had thought

For once, the UK economy has been getting press coverage that George Osborne can enjoy.

Newspaper columnists have been talking about "green shoots" for a couple of weeks. Now the cover of this week's Economist magazine has Britain "sailing out of the storm".

Are they right to be so upbeat? If you're judging simply on the latest economic news, the answer would have to be a resounding yes.

Nearly all of the economic data released in the past month has been better than expected. And even the bad news on GDP from earlier in the summer has been partly revised away.

Two months ago, the Office for National Statistics told us the economy had contracted by 0.7% in the second quarter. Now it says the decline was closer to 0.4%. That still sounds less than wonderful, but the implication is that the economy might have grown slightly, had it not been for the extra bank holiday.

In those same three months, employment grew by more than 230,000. There are now about 700,000 more people in work than at the start of 2010, when the labour market started its unexpectedly early recovery.

The surprising strength on the jobs front has been debated and chewed over endlessly (see, for example, this). But there is little debate that jobs growth on this scale has raised incomes overall, even if many individual pay packets are not so hot.

The UK's industrial production in July grew at its fastest rate in 25 years. And we've had more good news today - from the service sector, which accounts for more than 75% of the UK's economic output. It grew by 1.1% in July, after falling by 1.5% the previous month, when there were two more bank holidays than usual.

That July figure for service sector output is still only 0.3% higher than at the end of 2011. But any growth at all is reassuring, in an economy that has been technically in recession since January.

All of this has City economists confidently predicting that the UK has come out of recession, and our national output will have expanded by more than 0.5% in the three months from July to September.

If we're gloomy when the news is bad, we owe it to ourselves to be happy when the news is good. But maybe we should be trying to look past these knee-jerk responses, to the bigger picture.

In truth, the situation was never quite as bad as the words "double-dip recession" suggested (I complained about this back in April).

A more accurate summary would be that the economy has been broadly flat for the past couple of years, but that there's good reason to think that the period of bumping along the bottom might be coming to an end.

We should remember that a pick-up in the autumn of 2012 was exactly what many people were expecting to see, at the start of the year. That was when the likes of the deputy governor of the Bank of England, Charlie Bean, were suggesting, cautiously, that "the squeeze would ease" in the second of 2012, when inflation would be coming down, and real incomes starting to grow.

The latest numbers show that prediction is indeed coming true. The second half of 2012 will be better than the first. And 2013 will - we hope and trust - be better than 2012.

But if today's forecasts are right, the UK economy will still have shrunk slightly in 2012, when we were supposed to have grown by around 1%. And even if we are "sailing out of the storm", growth next year is forecast to be a less than racy 1.2%.

It is good news if we are now moving forward instead of back. Pity it should come as such a blessed relief.