Friday, February 26, 2010

GDP growth figures revised - Election fever starts

I was wrong. There, I said it up front so no one can accuse me of trying to hide it. In a previous post I suggested that poor retail sales figures in January, coupled with record government borrowing pointed to the fact that the ONS would revised the GDP growth estimates downwards not upwards.

Today however the ONS have revised the figure up from a 0.1% growth to a 0.3% growth in Q4 09. This doesn't mean that a double dip still couldn't happen but it does make it marginally less likely.

What it has done though is start the speculation on a March 25th election date. On these figures Labour can go to the pools on the back of claims that Labour policies of fiscal stimulus and increased public spending have got the UK economy out of recession. They can also claim that a 0.3% recovery is still weak and keep a dividing line between their investment and Conservative cuts on the doorstep.

On the other side they avoid any chance that in April ONS figures will show a double dip recession, and don't have to put out a full budget before polling day, as they would have to do so with a May 6th election.

This weekend is also the Conservative Spring Forum. A mini conference where Cameron et al will be relaunching the conservative campaign and gaining an enormous amount of airtime and publicity. Rumours and predictions have been swirling around the web that this weekend would be the one chosen to announce a March election, to take the limelight away from the Conservative conference. On top of this the latest polls have seen a shortening of the Conservative lead, IPSOS Mori is putting it at just 5%, with YouGov's latest daily tracker putting it at 6.

So, despite fear of getting it wrong again, my money is now moving from my prior predictions of a leave it until as late as possible June election to a March 25th election. On this point, please remember that once an election is called fund raising activity etc ceases, so make sure you donate to your favourite candidate's campaigns now. Local Stratfordians can donate to Nadhim Zahawi's campain through his website (scroll down and enter an amount then click donate on the right hand side)

Update: So it turns out that this morning's revision of GDP growth figures upwards wasn't quite all it seems. GDP for Q4 was actually revised downwards by £133bn, which lets face it is no insignificant. So why have all the headlines been screaming we're out of teh recession by more than we thought. Well because the ONS revise GDP figures about 4 times before they're final.

The increase of 0.2 percentage points was actually because the Q3 and Q2 figures were revised significantly downwards so the growth between Q3 and Q4 went up as a result (despite the actual Q4 output being revised down), confused yet?

Something else the new figures  show is that peak to trough fall in GDP throughout this recession has been 6.2% not the previously quoted  6% so this definitely makes it the worst recession since 1920.

All in all these figures aren't fantastically positive for the government I'm sure that the markets (who will delve deeper into the numbers than the headlines) won't react strongly to them, and the fact that Darling wasn't out there singing about how great the economy was shows that the government know there is still a long way to go. Will this change my prediction for a GE on March 25th? Short answer no, because most of the public won't understand the reasoning behind these new figures and even if they did the Government can still point to the fact that it's ended the recession.

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