The Staggers

The New Statesman’s rolling politics blog

GDP figures offer little relief for Osborne

Growth of 0.5 per cent in Q3 was less than half of what Osborne needed to meet the OBR's forecasts.

By George Eaton Published 01 November 2011 10:38

The number crunchers at the ONS have just announced that the economy grew by 0.5 per cent in the third quarter, a better-than-expected figure but still a sluggish one. In the last 12 months, the economy has grown by just 0.5 (-0.5 per cent in Q4, 0.4 per cent in Q1, 0.1 per cent in Q2 and 0.5 per cent in Q3) and Osborne has no hope of meeting the OBR's forecast for 2011 growth (1.7 per cent), with deleterious consequences for his borrowing targets. Over the same period, the US grew by 1.6 per cent. Britain is still in the growth slow lane.

In political terms, today's figures will change little. George Osborne will continue to stand by his deficit reduction plan and Labour will (rightly) continue to argue that the government is cutting "too far, too fast". In the last year, 240,000 public-sector jobs have been lost and 264,000 private-sector jobs have been created, a net increase of just 24,000. Worse, the Chartered Institute of Personnel and Development has predicted that 610,000 public-sector jobs will be lost by 2016, 210,000 more than forecast by the Office for Budget Responsibility.

Attention will now move swiftly to 29 November and the Chancellor's autumn statement (the equivalent of the old pre-Budget report). In some respects, the government has already adopted a plan B in the form of credit easing, accelerated deregulation and more quantitative easing by the Bank of England (described by Osborne in 2009 as "the last resort of desperate governments when all other policies have failed"). The question remains whether it will change course again by temporarily slowing the cuts or offering further fiscal stimulus (a plan C, if you like). Today's figure was not bad enough to force a change of direction but nor was it good enough to offer any hope that Osborne will meet his deficit reduction targets. The government has already been forced to announce £44.5bn of extra borrowing due to lower growth and higher unemployment. Expect Osborne to announce billions more when he delivers his statement later this month.

And there's every reason to fear that the fourth quarter will be worse. The most recent Bank of England minutes revealed that the Monetary Policy Committee believes growth will be close to zero in the final three months of the year. But so managed have our expectations become that some growth, any growth will be welcomed.

Special Offer: Get 12 issues of New Statesman magazine for just £12

Tags: OBR George Osborne

More from George Eaton

25 comments

Sat, 2011-11-05 08:54 — matthew fox (not verified)

The economy grew by 2.2% in the first three quarters of 2010 Awake. Since then, we have had negative growth, poor growth, now average growth.

Awake, can you explain to me, how an economy goes from annualised growth of nearly 3% to 1% over the over the last year?

Osborne needs to come up with more imaginative excuses or change course.

Tue, 2011-11-01 19:53 — matthew fox (not verified)

@Marco

Would you like to comment on the preceding GDP figure for Q1 & Q2?

No one expected growth of 1%, so grasping numbers out of thin air, smacks of desperation.

I hope Marco is aware retail, construction and manufacturing are shedding jobs too, are they removing waste as well?

Thu, 2011-11-03 17:52 — Awake!

Fox
itr grew some this year- can u allow itto consolidate a little- do u get business? it's noty numbers- I buy siome plant so capex shows up, productivity increases, then it's a new base- ure so boring to deal with cos u never think first. Do you reflect what 'growth' might be?? is there fake or real growth, and how does it manbifest? is it lumpy, or smooth... youre so boring cos u don't even try to understand anything- i'm surprised u get home in the evening that must utilise a chunk of your faculties

Wed, 2011-11-02 01:19 — Indu Pendent (not verified)

@matt

Foxy, its good to see that the economy is not in a recession and is unlikely to be now. How does that make you feel?

Also, have you a view on the £350Bn borrowed by Labour before 2008 which they did not invest and the interest payments that families are now having to pay on Labours debts?

Finaly, do you think the coalition should increase or decrease borrowing? Milibandwagon think they should decrease borrowing whilst your friend Balls up thinks the opposite (have you a split personality trying to follow both of them?).

Tue, 2011-11-08 19:08 — matthew fox (not verified)

Inbrew,the unemployment lines are growing, welfare spending is on the rise, who does the feel? terrible.

Tue, 2011-11-01 11:00 — swatantra nandanwar

Not the best time to be in Govt with Trojan Horses and Achillies Heels and Greeks bearing no gifts.
Whatever possessed them to put it to the Greek People in a Referendum? The result is a forgone conclusion: A decisive No, as the Greeks show that they have no stomach to live within their means.
Lets see all the Govts in Europe acting responsibly and accepting that responsibility instead of palming it off or kicking it into the sidelines.
The time for a National Govt has probably come, so that all or energies can go into solving the basic problems underlying all European economies.

Tue, 2011-11-01 11:10 — Awake!

hahah blanchflower must be spitting blood, re writing his piece furiously.
don't worry though, the greeks are going to eject, the Italians won't even try austerity and euro WILL blow itself up, Cameron walking away dusting himself down whilst having had to do nothing. World DGP will collapse though.

I do know a eurozone joke if that cheers anyone up...

Wed, 2011-11-02 07:37 — Luddite (not verified)

Indu Pendent: There no point trying the reason with 'matthew fox'..
1% is in total denial about our previous government. The state is to big and no longer affordable. Government pensions for the privileged few to generous, and now we have a disgusting situation were the teaching unions say they shouldn't be force to retire at 68, like the rest of us. Talk about our new aristocracy they constantly fart on about equally, but in their twisted world some are more equal than others.

Tue, 2011-11-01 11:43 — frances smith (not verified)

so seeing as osborne was preparing to blame the euro if the q3 growth figure was lower than expected, is he now going to give it credit because its higher?

Tue, 2011-11-01 12:07 — Stu (not verified)

@Awake!
Go on tell us...

Wed, 2011-11-02 08:24 — Aide Memoire (not verified)

"But so managed have our expectations become that some growth, any growth will be welcomed."

But who has been managing expectations? I mean, what kind of halfwit is always, incessantly, presenting as gloomy a picture as possible, purely to suit their ideology?

"Growth in the second quarter was recently revised down by the ONS to just 0.1 per cent and the Q3 figure is unlikely to be much better.

The challenge is clear. Unless the Q3 growth figure is at least 0.5 per cent, Osborne will no longer be able to boast that the UK has grown by more than the US this year."

Well done for managing expectations. If you really want to impress, try making accurate predictions.

Tue, 2011-11-01 12:25 — Awake!

an Italian, a spaniard, and a greek walk into the bar and drown their sorrows re austerity... Who pays the bill?

Tue, 2011-11-01 12:26 — Awake!

the German!!

sorry in u heard it before!! I'd love to post that in das Spiegl!

Tue, 2011-11-01 12:29 — Stu (not verified)

Hmmm... was ok lol...

Now it's different, they have a begging bowl and they want the Chinese to bail them all out. Thats even funnier

Wed, 2011-11-02 09:43 — swatantra nandanwar

George has managaed to put his own spin on it, and indicated that the green shoots of recovery are buried somewhere in those figures. So things are looking good. and Sheffiefld Forge Masters may be getting that loan after all.

Tue, 2011-11-01 12:34 — Awake!

frances
Don't worry, u'll get your chance to blame osborne... we ain't seen nothin yet,and I really do mean it hasn't even started

Tue, 2011-11-01 13:06 — Stu (not verified)

Blame Osbourne, Brown, Darling, Balls... plenty of people to shoot down

Sun, 2011-11-06 13:00 — Indu Pendent (not verified)

@matt

Foxy, how does it feel? That the economy is growing? No double dip recession as Labour was spinning. Great isnt it that the UK is healing slowly from the wounds inflicted on it by Labour.

Did you hear on Question time when Balls-up kept going on repeatedly about the economy flatlining - and a chap called out from the back actually it is growing and the audience broke into spontaneous clapping and cheering making Balls look a prick. You might not see it Foxy, or see that Balls up is a dick, but the voters do. How does that make you feel?

Tue, 2011-11-01 15:07 — swatantra nandanwar

... how about blaming the great british people ie you and me, for borrowing and spending like there's no tomorrow?

Wed, 2011-11-02 14:12 — matthew fox (not verified)

Indoo, I feel that someone who talked about Lagarde and the Credit rating agencies criticising public sector pensions, yet failed to produce any evidence is playing a very poor hand.

Dont forget, the conservatives blew north sea oil revenues and privisation receipts and added hundreds of billions to the national debt.

The irony of that is Major and Thatcher spent over £1,000,000 of public money in the last five years, yet have so little to show for it.

Talk about history repeating itself Indoo.

Wed, 2011-11-02 14:14 — matthew fox (not verified)

Luddite if your pretend to ignore the appalling CBI manufacturing survey, produced last week, it tell me so much about you.

I thought the " Makers where Marching " ?

Thu, 2011-11-10 07:32 — Luddite (not verified)

Awake! You will receive no coherente response from 1%.. The euro-zone crisis is hitting exports and investment. Higher inflation has squeezed incomes. The apologist from the left say there's a costless alternative to responsible government. There is not!! a policy reversal would be the worst of both worlds, but there again, many on the political-left don't live in the real world. Britain isn't a nation of shop keepers, it's a nation of small to medium sized business and remains the seventh largest manufacturer in the world. Government needs to get off our backs and it's hands out of our pockets. Them and only then can we deliver economic salvation.

Tue, 2011-11-01 16:22 — matthew fox (not verified)

Osborne was blaming the snow not so long ago, the poor lad will be running out of meteorlogical events.

The city forecast was 0.4% so he's actually beaten a city estimate for a change.

I see the latest PMI manufacturing report is out, more grim reading, the makers aren't marching at the moment, more hokey-cokeying.

The only problem with shooting, is that certain people keep aiming at their feets, and from the shambles they write, are a crackshot.

Wed, 2011-11-09 07:38 — Luddite (not verified)

1% What are you farting on about? "rise, who does the feel terrible"? Look here 'matthew fox'
Greece will default Italy also.. than all bets are off.. Who do you think pays for the NHS our Education system, generous pensions for our privilege public workers. Tell me 1% WHO? I mean created wealth not borrowed wealth.