Today’s new forecasts for the UK economy from the respected ITEM club seem to be being hailed as ‘good news’.
“Britain’s double-dip recession ‘over and recovery on the way’” says the Telegraph, ”Olympics to aid UK economy’s ‘Indian Summer’” reports Sky News, whilst the BBC goes with “UK economy to see return to growth”.
Now obviously an end to the recession would be good news, but before we break out the champagne it’s worth having a look at how ‘good’ these good forecasts actually are.
The ITEM club is predicting growth in 2012 of zero per cent, followed by 1.6% in 2013 and 2.6% in 2014. In other words we’ll have reached the 2008 level of GDP in about 30 months time after a lost half decade of growth.
They also expect unemployment to rise until 2013 and business investment to remain depressed until 2015.
Think about it like and it may be time to keep the champagne on ice and instead reach for something a bit cheaper, maybe prosecco.
Now compare the new ITEM club forecasts to the June 2010 Budget forecasts, the ones on which the entire deficit reduction startegy are based. Back then the Government expected growth in 2012 of 2.8% (against the ITEM Club’s 0.0%), 2.9% in 2013 (against 1.6%) and 2.7% in 2014 (versus 2.6%). And remember that this follows growth misses in both 2010 and 2011. Now put away the prosecco and take out the lemonade.
These new forecasts are better than many are predicting but they are still dreadful. The confirmation of the slowest recovery in modern economic history and rising unemployment are being greeted as ‘good news’.
As I wrote back in April, I worry we are firmly suffering from the ‘soft bigotry of low growth expectations’. Expectations are so low that what is objectively bad news is seen as good. Zero per cent growth in 2012, four years after the initial crisis following on from weak growth in 2011 should not be seen as a success.