So, farewell to the recession of 2011/12. Goodbye. You won’t be missed, except possibly by some of the sillier members of the Labour Party.
Growth of 1 per cent in Q3 is a good number, and as long as there’s at least 0.2 per cent growth in Q4, overall growth for 2012 will be positive. Ministers should be pleased, but not too pleased.
As I mentioned the other day, the Coalition shouldn’t get carried away with a single quarter’s figures, for several reasons:
1) There’s an awful lot of ground to make up. Today’s figures put the economy back where it was a year ago. Reversing the reductions in GDP caused by the first of the double dips, the horror of 2008/09, is a much bigger job; depending on how you reckon it, we’re barely half way back to where we were when all this started. The rest of the journey could be slow and painful, especially if the more negative explanations for Britain’s falling productivity turn out to be correct. The austerity programme is far from over, and the Autumn Statement is still going to be a grim affair.
2) Remember the unknown. The threat of external shocks surely remains high. Just because the eurozone crisis hasn’t erupted recently, that doesn’t mean it’s gone away. The Chinese miracle economy has been looking less miraculous recently, and the leadership transition in Beijing isn’t certain to be smooth. And some people in Whitehall will tell you that if Israel goes after Iran’s nuclear programme, all bets for the global economy are off.
3) People don’t experience GDP. They experience GDP per capita, disposable income, inflation and employment. Does anyone reading this today feel richer because of a number published by the ONS? You may feel a little more optimistic, but the consequences of that optimism are diffuse and face serious time-lags before they are felt.
4) You can never bet on public gratitude. Even if this is the start of a period of sustained growth that eventually means household finances and employment are rosy by 2015, no one can be sure who, if anyone, voters will thank for that. Many in Government cling to the idea that if the economy comes good, nothing else matters. Yet recovery is a necessary condition of re-election, but not sufficient: voters have to give you the credit for their improved lot. If the idea of Government incompetence starts to stick, it’s possible that the electorate will conclude that a recovery has come about not because of the Government but despite it. Voters can be an ungrateful bunch: just ask John Major.
