Been down so long, feels like up to me
A new recession is starting to look more likely than not. Today, the GMB pointed out that the number of jobs lost in local authorities since the general election has passed the 100,000 mark and the CIPD reports that 610,000 public sector jobs are likely to be lost by 2016 – two hundred thousand more than the forecast from the Office for Budget Responsibility.
Last week, I reported that two-thirds of managers think a double-dip recession is likely and now a survey of finance directors finds 43% of them thinking along the same lines. I think they’re probably right. Look at the GDP figures : over the past 9 months net growth is 0%, and the results for the past two quarters have had to be revised downwards. But look at the figures in more detail: GDP is only being held up by government spending, which in the last quarter rose by the largest amount since the start of 2008. The contribution to GDP growth made by government spending has increased in the first quarter of this year, rising from nothing at the end of 2010, to 0.2 percentage points in the first quarter of 2011 and 0.3 in the second:
If the government sticks to Plan A and continues to make cuts this contribution is very likely to fall; if that had happened in the most recent quarter we would already have declining GDP.
Business investment isn’t growing as fast as expected: year on year growth in the latest quarter was 3.8%, well down on the OBR forecast of 6.7%.
But for me, the killer is the picture for household spending. This accounts for more than 60% of GDP (measured by expenditure) and it is here that the data most clearly show a double dip:
This looks pretty terrible: household spending is plummeting, business investment is disappointing and the government is doing its best to cut government expenditure. (Oh, and by the way, look at the table, trade isn’t about to save our bacon.)
Quantative Easing will have to work pretty damn quickly or a double-dip recession looks very likely.