Updated GDP figures for the last quarter of 2010 give a clear picture of the British economy’s continued decline. The headline figure shows a fall of 0.6%, with the ONS still arguing that the impact of December’s cold weather was about 0.5%. The ONS has stated that output both from manufacturing and service industries was lower than expected.
Ominously, household expenditure fell for the first time in 18 months.
The only positive number came in government expenditure, which rose by 0.7% – this of course is the period before the cuts come into effect. The Guardian reports:
“The detail shows that government spending was the only positive growth driver,” said James Knightley at ING. “This is fairly worrying given we know about the wave of fiscal austerity that is now starting to hit the UK economy, meaning that we will soon be starting to see negative figures for this component.”
The Treasury said the figures do not affect its determination to tackle the country’s record budget deficit. “The chancellor said that the fourth quarter growth figures were disappointing and today’s revision doesn’t change that fact,” said a Treasury spokesman. “It also doesn’t change the need to deal with the nation’s credit card – the country is borrowing more this year than is spent on the entire NHS.” He also noted that surveys, which showed the economy bounced back at the start of the year, had “exceeded expectations”.
Two quick points:
- If these numbers faithfully reflect the trend, Osborne is in some trouble. There’s no sign of the sort of increase in confidence that would lead to the creation of private sector jobs on the unprecedented scale that Osborne needs to deliver his strategy. With hundreds of thousands of public sector jobs being lost, the outlook is grim indeed.
- The Treasury press officer’s response is more worrying still. Talk of “the nation’s credit card” is not only misplaced in its own terms but demonstrates an astonishing degree of economic illiteracy – not just in the press office but presumably among the special advisers who cleared the line. It becomes tedious to repeat that Government and household borrowing are not the same thing at all, but a Government department that has always been regarded (not least by its own inmates) as being among the intellectual elite really shouldn’t need reminding. Moreover, if you’re going to claim that the snow damaged the economy in December, you need to accept that there will be a corresponding bounce back in the milder January.
These numbers need to be seen in the context of the consumer confidence figures, also released today – which show that February saw no more than the most marginal improvement in the historical lows of January. For those of us who believe that the Coalition is tanking the economy, there is nothing here to change our view.