The Tories have responded to today’s US growth figures by proudly pointing out that the UK economy grew more than the US (0.5 per cent vs. 0.4 per cent) in the first quarter of this year.
But this is an entirely bogus comparison for one obvious reason.
While the British economy shrank by 0.5 per cent in the previous quarter, the US economy grew by 0.8 per cent. Thus, the US experienced real growth in Q1, while the UK merely recovered the lost output of the previous quarter (although I’m being too kind to George Osborne, as I’ll explain below).
Thanks to Labour’s fiscal stimulus and the Bank of England’s ultra-loose monetary policy, the UK economy grew at a faster rate (1.8 per cent) over Q2 and Q3 2010 than the US economy (1.1 per cent). But the coalition’s austerity measures (most obviously the reckless VAT rise) and the resultant collapse in consumer confidence mean that the UK economy has flatlined over the past six months while the US economy has expanded by 1.2 per cent.
For the government to accuse Ed Balls of “hysteria” when he points out as much is merely another sign that they have lost the argument.
Incidentally, I, like most people, understated how bad the Q1 figures were on Wednesday. It is not accurate to say that the economy has recovered all of the output that it lost in Q4. As Sunder Katwala points out, “a 0.5 per cent increase on the reduced figure doesn’t make up for the 0.5 per cent fall from from a higher base”. For once, I was too soft on Osborne.