by Stephen Tall on October 25, 2012
Four months ago, just after the last set of quarterly figures published by the ONS showed a sharp contraction in the UK economy, I highlighted economist Hamish McRae’s very public assertion that the UK was in actual fact no longer in recession. Pointing to the second-highest rate of job creation ever in the private sector, combined with falling inflation, he declared: ‘pull all the other data together and the figures would be consistent with an economy growing at around 1 per cent a year’.
Here’s what he has to say about the latest quarterly growth figures of +1.0%, which officially bring the double-dip recession to an end:
If you stand back and look at the UK economy as a whole, the broad picture that emerges is one of very slow growth, maybe 1 per cent a year. In any terms that is disappointing, way below its long-term underlying growth rate of 2-2.5 per cent, and particularly disappointing given the ground lost since the last peak. The economy are still officially more than 3 per cent smaller than it was in the first part of 2008. There is a long way to go.
Looking ahead there are both positive and negative signs. Among the positive are lower inflation, with the possibility that inflation might fall below nominal wage growth early next year. At the moment it is still a little above it. That would mean that real wages, the chief determinant of living standards, should start to rise again. We would, for the first time for about four years, start to feel a little richer. Consumers are already rather more confident than they have been for several years and, to take a snap-shot of the biggest consumer purchase, the UK is the only big car market in Europe, where sales are up rather than down. …
So meanwhile the thing that will keep the economy moving forward will be domestic demand. These latest GDP numbers show particularly strong growth in our service industries and that is encouraging. But consumers remain strapped for cash. We are long way from moving the economy from its present slow walk to a brisk trot, let alone a canter.
Hamish McRae’s estimate of 1% annual growth is backed up by Jonathan Jones’s estimate for The Spectator’s Coffee House blog here that the real growth rate this quarter was — once you’ve stripped out last quarter’s exaggerated slump and the one-off boost this quarter of the Olympics — about 0.3%.
In the circumstances, then, Nick Clegg’s pre-response to the news seems to get the tone about right — Nick Clegg warns of ‘slow and fitful’ economic recovery:
“There’s a lot of speculation about what the GDP figures will bring. Whatever they look like, we know that, overall, we’ve set the economy on the right path. But recovery is slow and fitful. Repairing the damage following the shock in 2008 is a gradual healing process. And the government must remain absolutely focused on the reforms that will drive growth.”