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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.

By George Eaton Published 15 October 2012 10:49
Chancellor George Osborne. Photograph: Getty Images.
George Osborne gives a television interview during the Conservative conference in Birmingham last week. Photograph: Getty Images.

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.

Tags: George Osborne  Conservatives  Economy  

 
 

11 comments

Quattro Man's picture

Tue, 2012-10-16 00:54 — Quattro Man (not verified)

And what do Labour do when the money runs out?

Oh dear, you do not have a clue do you?

Amen, rest in peace.

Mr Bingham's picture

Tue, 2012-10-16 15:02 — Mr Bingham (not verified)

This country was never ever on the verge of bankrupcy.

There is billions upon billions of pounds in Reserve Funds that this or any other Government can access/use.

You know, the Reserve Fund that George Osborne and this Tory Led Coalition tucked into to finance the Libyan Civil War. Yes one of those Reserve Funds that this Tory Led Coalition should have used to lower or pay off the British Deficit that they claimed was their top priority.

It is crystal clear that lowering or paying off the British deficit is least of this Governments worries.

Mr Bingham's picture

Mon, 2012-10-15 22:35 — Mr Bingham (not verified)

Why all the surprise because weeks before the 2010 general election Mervyn King the Governor of The Bank of England publicly said that the Conservatives were inexperienced and cannot and should not be trusted with the British economy.

A short time after the conservatives got into Downing Street as a Tory Led Coalition in 2010 and once George Osborne become the Chancellor of The Exchequer the world respected financier Sorros publicly said at the World Economic Forum in Europe that George Osborne's deficit reduction plan and austerity measure were/would be dangerous to the British economy.

In addition to this many other economist sounded the same warnings regarding George Osborne's deficit reduction plan and austerity measures.

All this and I put my money on it that George Osborne has never even bothered to have a crash course in economics. I suspect, even if he did, he would not understand much.

This country is in the hands of chancers !

Mr Bingham's picture

Mon, 2012-10-15 22:35 — Mr Bingham (not verified)

Why all the surprise because weeks before the 2010 general election Mervyn King the Governor of The Bank of England publicly said that the Conservatives were inexperienced and cannot and should not be trusted with the British economy.

A short time after the conservatives got into Downing Street as a Tory Led Coalition in 2010 and once George Osborne become the Chancellor of The Exchequer the world respected financier Sorros publicly said at the World Economic Forum in Europe that George Osborne's deficit reduction plan and austerity measure were/would be dangerous to the British economy.

In addition to this many other economist sounded the same warnings regarding George Osborne's deficit reduction plan and austerity measures.

All this and I put my money on it that George Osborne has never even bothered to have a crash course in economics. I suspect, even if he did, he would not understand much.

This country is in the hands of chancers !

Posh Tosh's picture

Mon, 2012-10-15 22:19 — Posh Tosh (not verified)

"Triple Dip"?

Sounds alike the 3 parties are all in this together.

3 in a bed to save on bankers expenses?

Barrie J's picture

Mon, 2012-10-15 14:19 — Barrie J (not verified)

From my everyday experience ordinary working folk pay no attention whatsoever to Ernst and Young and or government forecasts.
I don't remember any of them predicting the mess we're in now and since these people played a central role in creating it, naturally it would be difficult to believe they are any cleverer now than they were a few years ago.
People pay more attention to their job or lack of it, the ever increasing price of fuel / food / transport, etc., etc.
The rest is just City/Westminster/media gossip.
Talk the economy up, talk it down, is petrol, gas, bread getting any cheaper?

nourredine's picture

Mon, 2012-10-15 13:16 — nourredine

@Hugh C Markey,
I do not agree totaly with you.
Looking ahead of what going to happen in Europe, specialy France in the next 6 months, Europe will be in more mess than now.
The population in all Europe is getting older, young unemployed is rising, etc....
With the austerity coming to bite us from 2013.
The thing that conservative may do to get re-elected is to reduce the weekly working hours to 32 , preserving the salary, this will help the economy to grow, as people have more free time, the elderly people who decide to work longer can fit in the system, and young people can found more work.
Will the conservative go towards that idea? I am not sure.
Will the labour party adopt it? will see.

Hu Ru's picture

Mon, 2012-10-15 20:15 — Hu Ru (not verified)

.......The thing that conservative may do to get re-elected is to reduce the weekly working hours to 32 , preserving the salary,

hahahahahahahahahahahahahahahahahahahah

Hugh C Markey's picture

Mon, 2012-10-15 11:42 — Hugh C Markey (not verified)

If the UK economy is even slightly elevated, perhaps even flat-lining, at the time of the next general election expect the Great British Public, whatever the age-range - to vote Conservative.
It takes a World War or dire and corroded Tory government over a lengthy period before the UK electorate will reluctantly vote Labour.
Of course if living standards nose-dive during the late teens the UK voter will turn to the Labour Party as a life-saver and expect bloody miracles.
Oh, there is a Coalition government in power at the moment. First letter in Coalition and Conservative? Dumb Question!

Jaded

Mr Yup's picture

Mon, 2012-10-15 18:54 — Mr Yup (not verified)

corroded Tory government ?

Think we have one of those.

Spleenboy's picture

Mon, 2012-10-15 14:05 — Spleenboy (not verified)

C ?

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