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Lies, damned lies and recession statistics
Posted by David T Breaker (@DavidTBreaker)
Tuesday, 26th January 2010
The balloons are out in 10 Downing Street, the angel delight setting in the fridge, and Harriet Harman is already going hyper after scoffing a big wobbly red jelly in the shape of Gordon Brown whilst the Prime Minister himself searches desperately through his record collection for his favourite Antarctic Chimpanzees LP. Yes, it can only mean one thing: the recession is over!
But is it really over?
For starters the data released today by the ONS is for the last quarter of 2009, and those three months are typically strong as retailers head towards Christmas. Indeed the City and investors are far from impressed. The figures are “a major blow to hopes that the UK economy had emerged decisively from recession,” said Jonathan Loynes, an economist at Capital Economics. The pound fall against the dollar on the news, which was 0.2pc below the government’s forecasts, adding more weight to the argument that economic forecasting and the Met Office may as well be contracted out to Mystic Meg.
The data also has several misleading elements. The recession began officially in Q2 of 2008, but exempt rapidly rising public sector spending and in reality it started at least three months before; the same will be true on the exit, with an as yet unknown increase in State spending almost certainly pushing the data upwards by more than the meagre 0.1pc recorded GDP growth.
There is also the matter of inflation. Markets were surprised last week by a record jump in inflation, sending fears that interest rates would rise sooner than previously hoped by some. Interest rates remain at the record low level of 0.5pc and although the Bank of England's governor Mervyn King is reported to be in no hurry to raise interest rates other members of the Monetary Policy Committee are more hawkish. And then there’s the task of unwinding the stimulus plan and removing the £200bn the Bank has injected into the financial system, and cutting the government’s record deficit...
Recession over? I wouldn’t bet on it.
David T Breaker is a web developer and conservative blogger. He blogs at www.davidbreaker.com and is @DavidTBreaker on Twitter.
