Britain’s gross domestic product rose by 0.5 per cent in the third quarter of this year – a bit better than the expected 0.3 per cent.
But despite some initial optimistic news reports that the results were “better than expected”, closer examination revealed the full extent of the difficulties facing the British economy.
The third quarter was considered to be something of an anomaly representing some catching up for lost output in the previous summer months which taken altogether suggest average growth was 0.3 per cent.
But Bank of England forecasters think even that very modest performance will turn out to be better than the current quarter which is widely expected to be – at best – flat, as suggested by October’s Purchasing Managers Index which fell from 50.8 (above 50 is expansion) to 47.4.
All suggestions to date are that November’s figure will be lower as order books stay thin because customers are delaying orders and running down stocks – prompted in part by concerns in the eurozone, which accounts for 40 per cent of British exports.
Eurozone PMI indicators showed similar contractions and even before Greece’s announcement of a referendum on its austerity bailout there were signs of slowdown in Germany and France.
Concerns about the global economy were echoed by the International Labour Organisation which said that it would take years before jobs and growth can reach their 2008 levels.
But, it said, this would require the creation of 80 million new jobs –only half of which seem likely. It said it had recorded signs of increasing social unrest in 45 countries badly hit by the recession.
In Britain, the IPPR think-tank, using Office of Budget Responsibility (OBR) figures, said the “recovery” is already taking longer than it took to come out of the Great Depression.
Shadow Chancellor Ed Balls said the optimistic reports of 0.5 per cent growth could not disguise the reality that the economy is still flatlining, as it has been for 12 months, when
what is needed was strong growth
to get unemployment and the deficit down.
“As the ONS has said, growth of just 0.5 per cent over the past year since the Chancellor’s spending review compared to 1.6 per cent in the UK is a significant slowdown from the 2.6 per cent we saw in the previous 12 months when we were starting to recover from the global financial crash.
“Our recovery was choked off well before the eurozone crisis of recent months by spending cuts and tax rises which go too far and too fast.”
Stagnant growth and higher unemployment mean the Government is set to borrow £46 billion more than they planned.
Chancellor George Osborne will have to downgrade his growth forecasts for a fourth time later this month and revise up again his borrowing forecasts.
