Daily View: Is 0.5% economic growth worth celebrating?
Commentators react to preliminary GDP figures which suggest the UK economy grew by 0.5% in the third quarter of 2011.
The the growth in production isn't enough:
"These latest figures are consistent with an economy growing at around 1 per cent a year, maybe a little more but not much. That is not fast enough to stop unemployment rising, as the economy's natural growth rate is somewhere between 2 per cent and 2.5 per cent. While the private sector is still creating jobs, the rate at which it has been doing so is now too slow to offset the losses in the public sector. A year ago it was creating three or four jobs for every one lost; in recent months it has only been creating one job for two lost. On top of this, the forward-looking indicators such as the surveys of manufacturing opinion are disappointing."
- saying we are only narrowly escaping recession:
"The unfortunate reality is that we are only just beginning to see its effect here. The near stagnation of economic activity in the UK began in the fourth quarter of last year - well before the eurozone crisis reaching boiling point.
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"The slowdown in the UK is the result of a mix of domestic factors, particularly the chancellor's tough fiscal stance (which has knocked confidence in the private sector about future levels of demand), and global factors such as higher oil and food prices."
The - as it says the next quarter looks stagnant:
"The third quarter is, in any case, ancient history. The focus is now on the current quarter, which is likely to be ugly. The Bank of England's best guess is that GDP will be flat in Q4. The October purchasing managers' index (PMI) for manufacturing, released at the same time as the GDP figures, suggests even that might prove too optimistic. The headline index slumped from 50.8 to 47.4, below the 50 reading that divides expansion from contraction. November is likely to see another fall in the index, because order books are thinning at an alarming rate. Manufacturers say their nervous customers are delaying orders and running down stocks.
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"The main anxiety is of course the euro zone, where 40% of Britain's exports (and a fair chunk of its bank lending) go."
But . He says even though a breakdown of the euro would wipe out this growth, the UK would be in a position to recover quickly:
"We must not forget, however, that the natural condition of a global capitalist economy is one of fast growth - and that almost all of that growth now comes from rapidly developing countries far from Europe and largely unaffected by the problems of the eurozone. So on balance, it is more likely that world growth will surprise on the upside rather than the downside the next few years. And Britain, free of the fetters of the euro and now pursuing more sensible, pragmatic policies, will be better placed than its neighbours to take advantage of whatever opportunities the world presents."
Moving on to what politicians should do to promote growth, the the government's only policy to carry on growth - quantitative easing - is unlikely to help the majority of people:
"British economic policy remains spellbound by supply-side glamour. Big projects, like bank bailouts, are sexy. Leaving money in the pockets of consumers is not. Deep in the psychology of power lurks a yearning for the embrace of prestige, for life in a newly built Zil lane to a perpetual Olympics. Policy is essentially elitist. It distrusts the marketplace and the decisions of ordinary people. It strives to look after its own."
