“I don’t think so!”
The Office for National Statistics (ONS) tells us that during October, November and December 2009 (Q4), the economy, or more specifically UK’s production and service sectors grew by 0.1%. That’s the good news.
The bad news is that during the whole of 2009, our Gross Domestic Product (GDP) fell by a record 4.8%.
You have to remember that the above figures are derived statistically with a plus/minus margin of error and in addition, that today’s announcement is not based on all the available data . Therefore if the margin of error is, say +/- 0.1%, then that should put today’s announcement into perspective. The growth figure is so minute as to be meaningless.
Officially, after 18 months of negative growth, the government is telling us that we are now officially “out of recession”. The Chancellor has said that “confidence is returning” but there seemed to be a bit of a “whistling in the dark” aspect to his statement.
The car scrappage scheme and cash handouts to the banks have treated the economic symptom but definitely not the cause. In spite of £178 billions-worth of public borrowing during the last 18 months, economic output fell by 6%.
Had the announcement said that the 0.1% economic growth been as a result of increased spending and increased production then we might have been more inclined to show a bit more enthusiasm. As things stand, it is impossible to extrapolate from such a weak figure and agree with the government that the United Kingdom’s recession is over.
Some commentators are agreeing with the government and saying that the economy has just crossed the line in coming out 0f the recession. The economy has definitely not crossed the line on its own steam – it was pushed by a panicked government. Because current figures have too much “static” in them, primarily as a result of the government’s monetary intervention, it is difficult to see how we can claim to be witnessing real economic growth. Real growth will only come when the government backs off and allows the economy to stand on its own shaky feet.
It is not even 100% certain that 2009 Q4 figures are either accurate or that they represent any meaningful trend.
What the media have not fully explained is that the 0.1% figure is only preliminary and therefore more of a “guesstimate” rather than a “set-in-stone” absolute. The ONS has to strike a balance between accuracy and the pressure on them to produce some sort of number. Consequently, the figure given today is only based on about 40% of the available data. The 0.1% figure will definitely be revised with the real possibility of a downward revision. That could mean that technically we are still in recession. Two more revised figures will be published – on 26th February and 30th March.
Most analysts and commentators (and, one suspects, the government) had been expecting and hoping for a decisive upward swing in the economy but what has been delivered is the economic equivalent of a damp squib. The economy is still operating at way below pre-recession levels – and will probably continue to do so for a long time yet.
The pound-sterling will now get a pasting on the foreign exchanges and the best that the Chancellor will probably come up with, will be that “it will be good for exports”.
As usual, this is a lacklustre result from a lacklustre economy, led by a lacklustre government which seems to be doomed to the political equivalent of a Jolly Boy’s outing to the Dignitas Clinic.
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