From the TUC

Its the public sector that has driven growth

23 Jul 2010, by in Economics

Data from the Monthly Business Survey for construction disprove George Osborne’s claim that the private sector has driven today’s good (touch wood) results for GDP growth. Today’s preliminary estimates for GDP show that the economy grew by 1.1 per cent in the second quarter of 2010. As Nicola has pointed out, the sectors contributing to this total were:

  • Construction 0.4 percentage points (36 per cent);
  • Business service and finance 0.4 points (36 per cent);
  • Government and other 0.2 points (18 per cent);
  • Distribution, hotels and restaurants 0.1 points (9 per cent);
  • Production 0.1 points (9 per cent of total growth).

The improvement in construction was particularly noticeable. We have to be a little cautious about this sector, because the estimates are based on a new survey, but the Office for National Statistics are usually careful only to use new sources when they are sure they are reliable. We also have to be a little careful

The Chancellor of the Exchequer’s response to these results was very clear. He said:

“Today’s figures show the private sector contributing all but 0.1% of the growth in the second quarter, and put beyond doubt that it was right to begin acting on the deficit now.”

“Beyond doubt” – that’s pretty strong stuff. But the new construction data do not show a strong private sector recovery that means we can do without the public sector contribution. In fact, they show the opposite.

The figures show growth in different types of construction work in the public and private sectors. We can also look at growth from the last quarter of 2009 to the first quarter of 2010 and from the first quarter of 2009 to the first quarter of 2010. First up, let’s look at new  housing:

Latest quarter on  previous quarter Latest quarter on a year earlier
Public

+ 13%

+ 57%

Private

0%

– 8%

And housing repair and maintenance:

Latest quarter on previous quarter Latest quarter on a year earlier
Public

+ 3%

+ 6%

Private

– 2%

– 12%

Then infrastructure:

Latest quarter on previous quarter Latest quarter on a year earlier
Public

+ 1.3%

+ 49.1%

Private

+ 8.1%

+ 34.3%

Other new work:

Latest quarter on previous quarter Latest quarter on a year earlier
Public

– 1%

+ 36%

Private industrial

– 6%

– 10%

Private commercial

+ 1%

– 15%

Mr Osborne got it wrong – the public sector didn’t make a minor contribution to last quarter’s GDP growth. Public spending continues to play a vital role in keeping our economy afloat.

Notes

1. If you’ve read my earlier posting on the GDP data you will have noticed that this item is similar to the closing paragraphs of that one. After it was finished we found the full data on the ONS website and I thought it worth expanding on my first thoughts.

2. The volume of private commercial other new work is larger private industrial and public combined, accounting for 37 per cent of all new work, so the 1 per cent increase on the quarter is far from insignificant.

3. It isn’t possible to cover non-housing repair and maintenance because the data now separate out infrastructure repair and maintenance, making it hard to compare the latest and previous quarters (but non-housing repair and maintenance only accounts for 19 per cent of the value of construction output.)

One Response to Its the public sector that has driven growth

  1. Tweets that mention Its the public sector that has driven growth | ToUChstone blog: A public policy blog from the TUC — Topsy.com
    Jul 24th 2010, 2:45 am

    […] This post was mentioned on Twitter by ToUChstone blog, UNISON East Midlands. UNISON East Midlands said: Its the public sector that has driven growth http://is.gd/dDTz1 […]