Focus on a ‘triple dip’ misses the point
Will the UK economy experience a triple dip recession?
The simple answer is that I simply don’t know. The more honest answer is that I don’t really think it matters. Today’s industrial production figures certainly point towards one, but last week’s PMI surveys’ suggest growth of 0.1%.
In reality whilst a triple dip would no doubt generate many headlines, the difference between a Q1 GDP figure -0.1% and one of +0.1% is pretty unimportant, especially as the figures are subject to revision for years afterwards.
The bigger picture is that the UK’s recent economic performance has been disastrous.
The much-hoped for rebalancing has simply occurred. Today’s industrial production statistics tell us that industrial output is now back to 1992 levels. Business investment grew by 0.4% last year against an original forecast of 10.0%. Net trade subtracted from growth.
The government expected growth of 2.3% in 2011 and 2.8% in 2012, with two thirds of that coming from an increase in business investment and an improvement in net trade. Instead we got neither the growth nor the rebalancing.
Real wage falls, coupled with changes to the tax credit and social security system, have given us the longest squeeze in living standards in modern British economic history.
The labour market is hailed as ‘good news; but as important research from the Resolution Foundation today demonstrates, we still face a job gap of 850,000 to get back to pre-crisis levels of employment.
Productivity growth has collapsed, risking a longer term impact on living standards and growth.
And despite all of the government’s rhetoric on the UK being in a ‘global race’ – whether you measure it by growth, exports, manufacturing output or living standards, the UK is falling behind the other leading economies.
Against a backdrop of terrible growth, no rebalancing, a living standards squeeze, a weak labour market and productivity falls, the difference between a small contraction in Q1 and some small growth in Q1 doesn’t seem very important.
The economy is stuck and without a change in government policy the slump is set to continue.