The Bank of England warns Osborne: prepare for a triple-dip recession

Osborne said the economy was "on the right track" but the Bank warns growth could disappear in Q4.

It was always unwise for George Osborne to cite the most recent set of growth figures as proof that "we're on the right track", principally because the good news is unlikely to last. Growth in quarter three, which stood at one per cent, was artificially inflated by the Olympics (which added 0.2 per cent to growth) and by the bounce back from the Jubilee bank holiday (which added 0.5 per cent). There was, as I wrote when the figures were published, a strong chance of a contraction in the fourth quarter.

Now the Bank of England has become the latest forecaster to warn of the possibility of a triple-dip recession. In its quarterly inflation report, it notes that

Headline outturns for GDP in 2012 have been, and will continue to be, volatile, with the data buffeted by one-off influences such as the Jubilee and the Olympics. In Q3, output increased by 1%. In Q4, that growth rate seems set to fall sharply as the boost from the Olympics is reversed; indeed, output may post a small decline [emphasis mine].

Having claimed that the economy is "healing", Osborne will struggle to explain why the patient has taken another turn for the worse.

George Osborne at an EU Economy and Finance Council meeting in Luxembourg. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Cabinet audit: what does the appointment of Liam Fox as International Trade Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for International Trade.

Only Nixon, it is said, could have gone to China. Only a politician with the impeccable Commie-bashing credentials of the 37th President had the political capital necessary to strike a deal with the People’s Republic of China.

Theresa May’s great hope is that only Liam Fox, the newly-installed Secretary of State for International Trade, has the Euro-bashing credentials to break the news to the Brexiteers that a deal between a post-Leave United Kingdom and China might be somewhat harder to negotiate than Vote Leave suggested.

The biggest item on the agenda: striking a deal that allows Britain to stay in the single market. Elsewhere, Fox should use his political capital with the Conservative right to wait longer to sign deals than a Remainer would have to, to avoid the United Kingdom being caught in a series of bad deals. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.