A weak recovery isn’t an achievement
Yesterday the BCC said they expected some growth in the third quarter. Whilst this is obviously welcome news, it is worth looking at the numbers in more detail before we declare the recession over and break out the champagne.
The BCC is reducing its 2012 GDP growth forecast to -0.4%, from 0.1% predicted in June.
Our 2013 growth forecast is also being downgraded, to 1.2%, from 1.9% predicted in June.
The slashing of the 2012 forecast is obviously bad news, but the cutting of the 2013 forecast from an already weak 1.9% to a very poor 1.2% is possibly even more of a cause for concern.
Tesco’s results today suggest a similar picture. The BBC reports some comments from the CEO:
He also said that the Everyday Value range was growing fast due to the pressure being felt by customers.
“They tell us they’re resigned that this is the new norm. They don’t have great expectations that things are going to improve in the short term,” he told BBC News.
“They’re hit by fuel prices, they’re hit by taxes, real incomes aren’t growing so people are having to adjust and what we see is that they are starting to buy into supermarket brands more, they’re starting to buy our Everyday Value range… [which] is up 10% like-for-like.”
Whether we get a return to growth or not in the third quarter the overall picture doesn’t look like changing too much. We have a squeeze on living standards, weak bank lending and the Eurozone crisis all holding back the economy. rather than supporting growth the Government even more demand from the economy through austerity.
Back in June 2010 when the Government set out it’s economic strategy it was premised on economic growth of 2.9% in 2013. If the BCC are right and we instead get growth of around 1.2%, then that isn’t a success for the government, it’s a disaster.
The worry of course is that low expectations risk any level of growth being seen as a vindication of the goverment’s economic strategy. Some observers now talk of a new normal, they see low growth as something we just have to get used to. As I wrote back in April when a different set of BCC economic forecasts that were reported as ‘good news’ :
on some level this actually makes me angry. Angry that many people seem to have accepted very low growth as either somehow ‘inevitable’ or, even worse, as somehow a ‘good result’. Low growth is not inevitable nor is it an achievement.