GDP figures: What contribution has the private sector made?
In response to today’s GDP figures the Chancellor has stated that:
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.
Is this correct? During Q2 the ONS estimate shows that the economy grew by 1.1 per cent. So, 0.1 per cent of this growth would be 0.0011 per cent. Has the private sector contributed all but 0.0011 per cent of growth? No – as page 5 of the ONS release shows, the contribution to growth made by different sectors of the economy is as follows: Production 0.1 (9 per cent of total growth); Construction 0.4 (36 per cent – much of which will be state supported); Distribution, hotels and restaurants 0.1 (9 per cent); Business service and finance 0.4 (36 per cent); Government and other 0.2 (18 per cent). In Transport, storage and communications growth was negative, leading to a loss of 0.1 (9 per cent).
So, ‘Government and other’ spending has contributed 18 per cent of total Q2 growth – and a significant proportion of construction spending will also be accounted for by public sector investment (these figures reflect the situtation in April). At best the Chancellor’s statement appears to deliberately underplay the impact that public investment is still having on the recovery.