Osborne should prepare for a triple-dip recession

After returning to growth in the third quarter, the economy is in danger of shrinking again in the fourth quarter.

The hope among the Conservatives is that the next set of growth figures - released on 25 October - will allow them to promote a narrative of economic recovery. It seems likely that the economy finally returned to growth in the third quarter after three successive quarters of decline.

In its latest set of forecasts, Ernst & Young predicts growth of 0.7% in Q3 as the economy benefits from the inclusion of Olympics ticket sales (which are expected to add around 0.2% to GDP) and recovers the lost output from the extra bank holiday in the previous quarter. This would represent the strongest quarter of growth for more than two years, but if we strip out the temporary factors I mentioned, the figure would be just 0.2%. Worse for George Osborne, Ernst & Young expects growth to slow to just 0.1% in the fourth quarter.  As New Statesman economics editor David Blanchflower wrote in his most recent column, "We are in the slowest recovery since the Second World War and are perhaps even heading for a triple dip."

Bank of England MPC member Martin Weale has similarly warned: "The Jubilee depressed output in the second quarter so you get an automatic bounce back. But if we talk about underlying growth then I think the economy is flat. I certainly would not say there is no risk of [a triple-dip recession] happening." Martin Beck, UK economist at Capital Economics, told the Today programme last week: "we expect the economy to start contracting again in the fourth quarter."

Rather than heralding a sustained recovery, as the Tories hope, the Q3 figures will more likely represent a false dawn before growth vanishes again.

George Osborne gives a television interview during the Conservative conference in Birmingham last week. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Getty
Show Hide image

Election results in Wales: Labour on course to remain the largest party

Despite a shock victory for Plaid Cymru leader Leanne Wood, Welsh Labour will be able to govern without a coalition.

Labour have posted good results in Wales, where the party remains on course to be the controlling force in the Welsh Assembly.

At the time of writing, Carwyn Jones’ party has 24 of the 40 constituency seats, with Plaid Cymru a distant second on 6 and the Conservatives on 5. Among Labour’s notable holds was Gower, which the party lost narrowly at a Westminster level in the 2015 general election by just 27 votes.

There was a surprise victory for Plaid Cymru leader Leanne Wood in Rhondda, where she defeated Labour cabinet member Leighton Andrews with a swing of 24 per cent. Speaking about the result, a spokesperson for Welsh Labour said:

“The Rhondda result is a really tough for us – we’ve lost a great Minister and one of the most respected politicians in Wales. Clearly the huge national profile afforded to Leanne Wood has had an impact, and Plaid seem to have won this seat at the cost of making progress anywhere else in Wales.

“The other results so far have been good. In particular where we are fighting the Tories it shows the local campaigns have been successful.”

Welsh Liberal Democrat leader Kirsty Williams held on to her seat in Brecon and Radnorshire, while Ukip have yet to win any seats (although they are likely to get a few on the regional list).