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25 January 2011

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

Double dip looks highly likely now.

By David Blanchflower

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.

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