One of George Osborne’s favourite boasts is that the UK economy has grown by more than the US economy this year. He consistently cites this fact as proof that austerity, not stimulus, is the way to grow the economy. This passage, from an Osborne op-ed for the Telegraph in August, is typical:
The US economy has grown more slowly than the UK economy so far this year, despite fiscal stimulus in the former and fiscal consolidation in the latter, showing that the problem is not too much fiscal responsibility.
His basic claim is not wrong. In the first two quarters of this year, the US economy grew by 0.3 per cent (0.1 per cent in Q1 and 0.2 per cent in Q2), while the UK economy grew by 0.5 per cent (0.4 per cent in Q1 and 0.1 per cent in Q2). (Although, of course, the UK economy shrunk by 0.5 per cent in the fourth quarter of 2010, while the US economy grew by 0.6 per cent.) But today’s better-than-expected US growth figures have raised the bar for Osborne. In the third quarter, the US economy grew by a relatively impressive 0.6 per cent (or an annual rate of 2.5 per cent).
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It’s a figure that few economists expect the UK to match when the Q3 GDP figures are published on Tuesday. 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.
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