Disastrous growth numbers. And that's before the VAT rise

Double dip looks highly likely now.

By David Blanchflower Published 25 January 2011 12:24

The GDP growth numbers today are disastrous. Consensus forecasts were for 0.4 per cent growth but the actual number was -0.5 per cent. The ONS attributed a chunk of this to the weather but, even without it, growth was zero, suggesting a very sharp slowing.

As I have noted in my column, the surveys had suggested a sharp slowing in construction and the sector turned out to be a major downward pull on the data. The VAT increase (introduced earlier this month) means that there is every likelihood of another negative quarter of growth for the first quarter of 2011. Double dip looks highly likely now.

And the day before these numbers were published, the Monetary Policy Committee's resident hawk Andrew Sentance was calling for rate rises to restore the bank's inflation credibility. Nonsense. The MPC is likely to have to restart its programme of quantitative easing.

The coalition government's economic policy is in disarray. George Osborne's only response is that he is not for turning. Ed Balls is going to have a field day.

Tags: George Osborne

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35 comments

Wed, 2011-01-26 00:34 — thinkov

@matthew

you win !

Wed, 2011-01-26 00:44 — jie4v7i14

One thing we can say, Ozzies credentials have taken a hammering just before this economic jolly in Davos, Switzerland, over the next few days.

He'll be put on the dinning table with Greece, Ireland and Portugal for his poor show at his job - well down the pecking order he is, an also-ran.

Wed, 2011-01-26 05:09 — Colin Sloss (not verified)

The guy in the Independent said he thinks the figures are wrong.

Wed, 2011-01-26 11:07 — Robert (not verified)

Seeing Nigel Lawson on Newsnight last night reminded me of that splendid "Spitting Image" of him picking out green shoots of economic growth from the bloodied mess of a switched on food processor.

Wed, 2011-01-26 12:35 — jie4v7i14

Borrowed from his fat chested daughter no doubt, Robert, if it was these days.

Christ, if Nigella can cook, then I am an afghan war lord, jeezus wept!

Wed, 2011-01-26 12:36 — andygcc (not verified)

Voodoonomics - that is what I call the current fashion of 'spend your way to growth'. Those who think that the UK can somehow avoid a truly nasty hangover, after the massive rise in public and private credit are living on a Caribbean Island.

Who cares if GDP falls for a quarter or two or three; the question to ask is will the economy grow in a sustainable manner from 2012 or 2013?

What did the Bank of England Governor say last night? Another five years of hard times?

At least!

Wed, 2011-01-26 12:40 — jie4v7i14

The only bloke/wimman that I have seen that can actually cook out all them ponces and tarts, is obviously... Delia, yes. She should be slapping hands all round to these fucks who "think" they can cook.

Oh yes.

Tue, 2011-01-25 12:36 — Arturo Bandini (not verified)

Sadly, being right is the only comfort we're going to take from this.

Tue, 2011-01-25 12:47 — Paul Hillyard (not verified)

I suspect there will be some growth in the next Qtr as the weather was terrible last January, so technically a double-dip may be prevented.

It doesn't hide the fact that Labour were getting it right. Even the level of borrowing is going down before the cuts come in.

Tue, 2011-01-25 12:58 — David Vinter (not verified)

It is very clear that Mr Blanchflower works?, in a warm heated office. Given the weather we had before Christmas, I would not have been surprised with lower figures. Now I'm prepared to bet the good Mr B, has never worked outside with a temperature of minus 17, and a north east gale blowing snow. The fact is you spend time at home, spend nothing except essentials.
You see we don't all live within the M25, and there are millions living on below the average wage. If you spend your cash on keeping warm, and a full belly, then running up debt on your credit card to help the country grow a bit faster, is not priority number 1.

Tue, 2011-01-25 13:04 — robjam (not verified)

I don't suppose being right, yet again, is giving you much consolation, as you contemplate these truly dire figures David.

Strip away the 0.5 slump attributable (perhaps) to the snow (was it the wrong kind of snow?), & we're still left with zero growth - at just the point in the cycle when the effects of Labour's investment are wearing off.

Thank goodness Balls is in the right place at the right time to be able to tell evryone, loud & clear, that his policies were the correct ones, & that his criticisms of Osborne's plans have been proven correct.

Remember those bad old days of the 90s? The smug, snide, one-liners that Tories used to reel off? Osborne's "We won't be blown off course by one month of bad weather" reeks of those vile days - it was probably a line that sounded really clever when he dreamed it up with his spinners, but Balls should tear into him for it.

Tue, 2011-01-25 13:05 — Dave C (not verified)

I was expecting a mild surge in growth and spending as people brought forward their purchases to avoid the VAT increase.

Unlike 2009/10, where you could hardly move for posters reminding you that VAT was being restored to 17.5%, the retailers didn't do much of a campaign in 2010/11. Nonetheless, I would have thought people knew it was coming and would buy their 'big ticket' items before the increase.

So, if we ignore the weather, growth was flat and the spending spree didn't take place.

It doesn't seem likely that the ONS revisions over the nest two months are likely to take growth figure above zero.

P.S. It's Andrew Sentance, not Andrew Sentence.

Wed, 2011-01-26 12:56 — UberMoo (not verified)

Well done Gideon. That degree in history is certainly coming in useful...

Tue, 2011-01-25 13:49 — I want to be a serf

as are you historic comments DB. Have you not been pressing for a rise in interest rates for some time?
If you want to get a true insight into the mindset of Dumb and Dumber (aka the two Eds) then read this article.....

http://online.wsj.com/article/SB1000142405274870355580457610190393644089...?

as the old saying goes - "it always gets worse before it gets better" - this is true of economics as it is about pain. But once again the truth hurts and therefore you lefties simply will not, do not, and cannot see anything beyond your noses.

Tue, 2011-01-25 14:01 — Dave C (not verified)

serf asks, "Have you [David Blanchflower ]not been pressing for a rise in interest rates for some time?"

The answer is "No, he hasn't."

Tue, 2011-01-25 14:10 — Rose4

Ed Balls just had a field day on Daily Politics as Justine Greening was flailing about trying to find a positve in stagflation. Andrew Neill presented such a long list of problems ahead of the impact of VAT and cuts that she was visibly flustered resorting to claiming Labour would have cut more. Nice to see her excitable stridency while Balls remained calm and focused even maintaining the personal touch - Justine.....

Tue, 2011-01-25 14:37 — mcquade

There's an obious flaw and contradiction in Osborne's explanation. He says the snow prevented people from getting to work and consequently the output of companies slowed dramatically, but then takes solace from the rise in manufacturing output. So who was doing all the manufacturing, snowmen?

Tue, 2011-01-25 14:48 — ang (not verified)

David Blanchflowers economic predictions regarding the Tory-led govt have always been logical and now the results are starting to come in.
Growth and jobs have to come before any spending cuts, surely that is just common sense, but even now, when everyone can see that they have got it wrong, the chancellor comes out with the spin, as if nothing has changed.
Delighted to watch the abhorent Justine Greening, still defending her economic policy, in her usual robotic manner and looking down her nose at Ed B as if it were all his fault.

Tue, 2011-01-25 15:16 — jie4v7i14

For it to go from 0.7% growth in Q3 to a 0.5% contraction in Q4 is pretty abysmal, even if they think it would have been zero growth if the weather had been a bit better in December.

Certain people will be sweating for the next few months until Q1 figures for this year will be anounced in April. If it is in minus figures again, there is only one thing we can conclude, that these certain people have not got a clue where they are taking us, or want to take us. Osbourne today was just waffling and flailing today when asked where we stand at the moment.

If Q1 growth turns out to be a contraction when announced in April, this coalition will be on seriously thin ice, and the political and business media will give them a right good pen-thrashing.

Tue, 2011-01-25 14:53 — Hans Castorp (not verified)

Well mopped up Dave C. I want to be a serf is a sub-Randite shill. And the WSJ is a trade rag for the people who cocked *everything* up.

Five more months of this and we are in recession. Argh!

Tue, 2011-01-25 14:54 — ang (not verified)

@mcquade.
Very good point. My son and I were discussing that this morning.
Osborne is being backed into a corner, he has no defence for what he is doing.

Thu, 2011-09-01 08:46 — Valentina

Growth and jobs have to come before any spending cuts, surely that is just common sense, but even now, when everyone can see that they have got it wrong, the chancellor comes out with the spin, as if nothing has changed.
http://www.tipsfortraveling.net/

Tue, 2011-01-25 16:16 — elrob

Serf: as are you historic comments DB. Have you not been pressing for a rise in interest rates for some time?
------------
I have not always supported DB. He helped keep rates toolow too long dutring the boom. But you are deluded mr Serf if you think DB has been calling for higher interest rates for a long time; quite the reverse. He resigned from the MPC, after being the ONLY member to call for lower rates bepfree the crisis hit, warning that the banking crisis was going to cause huge economic pain and a crash was on the way. The rest of the MPC did not believe him. They were wrong, he was right.
....
and: If you want to get a true insight into the mindset of Dumb and Dumber (aka the two Eds) then read this article.....
-----------------
as for reading the WSJ, no thanks. Once a Murdoch rag, it has lost its reliability.

Tue, 2011-01-25 16:20 — crabstix (not verified)

What do they care? The bankers, their busom buddies, are getting their bonuses, the Murdoch's will get Sky and the rest of us can pray to keep our livelihoods. Same ols same old with these Eton rifles. Blank firing muffin racks and fag ends the lot of 'em.

Tue, 2011-01-25 18:05 — Extranea (not verified)

Sadly, there is no crumb of comfort for those who would like a slower deficit reduction. The argument appears to be swinging back towards those economists with a contrary view to the coalition but as ever it is the ordinary people that will suffer.

These figures are truly terrible and no gloss can be put on them. The coalition has to now start taking the threat to growth seriously and take some responsibility for this economic performance.

http://extranea.wordpress.com/2011/01/25/cbi-says-no-growth-strategy-and...

Tue, 2011-01-25 19:07 — andyg (not verified)

@David Vinter. Well said sir, absolutely bang on the nail. Further, lets not forget the solution to be put in place for a "recovery". Make the council and public sector workers unemployed.(This I'm meant to believe stimulates growth). Those who have commited crime will no longer do porrige, they can do the public sector jobs to earn their 'benifits'. (This stimulates growth). And for those who have failed miserably in what they were meant to be doing for society we will award them with massive unheard of bonuses. (This will stimulate growth). And if this fails, there is no plan B.
And we call them leaders!

Tue, 2011-01-25 19:42 — Clem the Gem

On the bright side, Gideon is now comparatively richer than the rest of us, especially as he has yet to pay his taxes...
http://clemthegem.wordpress/

Thu, 2011-08-04 13:04 — Awake!

just read the blogs above, some clearly don't like him because of his school and money, others think that by now ot would be a catastrophe. Where are you guys now? euro and US blowing up on bad debt, Ozzy first of the indebted rich countries to grab the bull by the horns, and the Left's explanation e.g Paul crookman... 10 yr gilts best bid in 50 yrs because short base rates are low and the economy looking shaky... I mean come on, be honest... it's just the future of our children that the blinded by hate clowns are playing with. Shambles. There is no honesty left, no one learns from there mistakes since the triple B's encouraged and spurred on the top down wooly mess that means no one can EVER be wrong.

Tue, 2011-01-25 20:55 — matthew fox (not verified)

Which other politician is remembered for " Staying The Course ? "

Tue, 2011-01-25 21:09 — thinkov

john Prescott?

He's stayed a good few courses

Tue, 2011-01-25 21:18 — matthew fox (not verified)

@ thinkov,

If that's your line of thinking, I see your John Prescott, and raise you Eric Pickles.

Tue, 2011-01-25 22:44 — Red Rag

Someone needs to get this idiot out of Number 11....and quick.

http://redrag1.blogspot.com/2011/01/red-rag-get-osborne.html

Tue, 2011-01-25 23:03 — Nilsey105

January, February and March, or the 1st quarter of the new year, are traditionally very slow in terms of economic growth. People dont spend in any major way during these months unless it is on their annual holiday. ( an Import). There is a drop off of purchases in large capital items, white goods, TV sets, new cars, etc etc luxury goods as some see them. People are paying for their over indulgence over the Christmas period. Cash is short and a realisation of what they actually spent comes as a shock to most, causes a decision to pull the purse strings ever harder. So if anyone thinks growth will reappear during the next 3 months think again. And think what is ahead for us all in the Uk .

Wed, 2011-01-26 00:01 — jie4v7i14

Nilsey105 - agreed, we'll be boomeranging back into recession by April. No one with any sense is going to be spending any bucks for a good few months, at the very least. Not many have the confidence to empty the coffers at the moment.

And to think we thought the main panic was over at the end of 2009. These lot in charge at the moment are clueless.