Well, there is no hiding from this. Today’s numbers just released by the Office of National Statistics for the UK economy in the second quarter of 2011 are dire.
I’m all for being optimistic, but there is no escaping that the economy is flatlining. Economic activity increased by 0.2 per cent in the second quarter of 2011, following an increase of 0.5 per cent in the first quarter of 2011. In other words, it’s going backwards.
Total services output increased by 0.5 per cent in the second quarter compared with an increase of 0.9 per cent in the previous quarter (again backwards). The largest contribution to the growth in this quarter was from business services and finance with 0.7 per cent growth.
Transport, storage and communication increased by 1.1 per cent, compared with an increase of 2.5 per cent previously. The story is the same with distribution, hotels and restaurants which increased by 0.3 per cent, compared with an increase of 0.9 per cent.
The one bit of light is construction output which increased by 0.5 per cent in the second quarter, compared with a decrease of 3.4 per cent in the previous quarter.
From a personal point of view (in fact anybody involved in manufacturing PR or engineering PR should be worried) the bullish manufacturing statistics of the last few months appear to have stalled. Manufacturing decreased by 0.3 per cent compared with an increase of 0.7 per cent in the previous quarter.
Where do we go from here? The Chancellor is adamant that there is no Plan B but as one client said to me recently, “as soon as he admits there is a Plan B then Plan A is dead.” What is clear is that the increase in VAT, petrol prices and fear over hefty increases in domestic gas and electricity prices have all given the UK consumer a fright and we are reigning in our spending. In my opinion, there has also been too much talk of austerity measures and comparisons with Greece etal (yes our debt is of a similar size but our economy is six times bigger!).
The Chancellor has taken a gamble. The lesson of the Great Depression was that stagnant economies need to be inflated, which in turn brings more receipts back into the Treasury. Instead he has chosen to take money out of the economy at a critical time.
On such decisions careers are made and lost.
PS: there is a political angle to all of this as well. Today’s numbers play right into Ed Balls’ rhetoric that the Chancellor is in ‘growth denial’. Expect to see Ed all over the news today as he hammers home this point which, on the basis of these numbers, is likely to gain some traction.