Tuesday, January 25, 2011

Double dip?

Do today's GDP growth figures tell us that we're on our way to a double dip recession (read as a Labour dream scenario)?Personally I would like to see John Rentoyl nominate this for his Questions to which the answer is no series although something tells me he isn't likely to agree it should make the list.

Today's figures of a 0.5% contraction are disappointing, have given us a day of concealed Labour gloating and certainly not what we really wanted to see at this point, but...

And There is a but here although some people see it as just an excuse (on Twitter someone described it as the British Rail excuse) but you may have noticed we had a spot or two of bad weather in the last quarter.

This is what the Chancellor has been pointing to today ending with the fantastic line (I'd love to know who came up with it because it's genius) of "we won't let bad weather blow us off course", which has begun to stick.

By comparison Ed Balls, who has probably done better than Alan Johnson would have done today, pointed to Bobert Barro and Ricardian equivalence as to blame, throwing in a bit of stagflation for good measure, proving he still knows how to communicate in catchy voter friendly soundbites. In voter speak though he basically pinned the blame on a fall in confidence.

In reality it's probably a bit of both, but to suggest there's a fall in confidence to blame alone, and that this is a result of government cuts which have been announced but not yet taken effect (public spending is up on this time last year by something like 5%, not cut yet) is rubbish when business confidence surveys all say otherwise.

The ONS, who say their data is iffy at best this quarter, and likely to be significantly revised later (this is the first of three estimates they will produce), have said that discounting for the snow, growth would have been flattish (so somewhere around zero but maybe a little higher).

So, conclusion. Does this mean double dip? No in my humble opinion, because of the weather, other indeterminable factors and the fact we expect growth to slow during a climb out of recession. The weather depressed sectors such as construction significantly and on top of that confidence is just not taking the beating that Labour would have you believe these figures suggest. Basically this is the equivalent of a rogue poll, the numbers alone don't capture what's really going on out there. Businesses I talk to, particularly smaller ones who will be the real driver for growth, are feeling positive, a little nervous perhaps, but generally they feel like things are on the up and are seeing then as such. I suspect that the ONS early estimates collect data from big businesses first, as they have better data collection and feedback processes, and that these are most affected by working for the public sector and a fall in potential future revenues hence the low figures, which were then compounded by the snow.

Basically though we'll just have to wait and see what the next quarter brings us and of course hope that the weather stays warm.

Bootnote: I think Osborne won the communications battle today with a catchier line and a message people can understand and relate to. For most people they can think yes, the snow got in the way of me getting out and spending, whilst far less will be thinking, well I spent less because I'm concerned about future cuts in my income.

What is concerning in the ongoing Comms battle though is how the message that there's no plan for growth is sticking. There's a lot of policies out there, but no document or plan with a catchy name bringing them together or a Comms strategy for telling people about it. This has to change, especially as even out own side had started jumping on the bandwagon.

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