‘Its not us gov., it’s the Japanese tsunami, and the Royal Wedding.’ These are the explanations/excuses used to justify Gross Domestic Product (GDP) increasing by only 0.2 per cent in the second quarter, a much lower figure than the 0.5 per cent of the first quarter.
The Office of National Statistics reckons that these two events knocked 0.5% off GDP growth in the second-quarter.
But the truth is there are always one off factors. The weather is too hot or too cold, snow – they have more excuses than Network rail. Although to be fair to them they haven’t used leaves on the line as a factor to affect output, but undoubtedly it will come.
If the economy is robust these events are of little significance. No, such events take on an undue importance only when the economy has flat lined and shows such low output as has been witnessed by the UK economy this last year.
This kind of economic performance will hardly cause the Chancellor to rejoice, but being a politician the silver lining will be a great deal larger than the cloud that contains it. He will claim that the economy is still growing, which is true, all be it at a dreadfully slow rate.
But if politicians did embarrassment, which of course they don’t, the Chancellor would be red faced now. Why? Well, it was he no less that predicted in his March budget that the UK economy would grow by 1.7 per cent this year. This now seems as realistic a prospect as Wales winning the soccer European Nations Cup. Nil chance.
In yesterday’s blog I wrote about the need for a plan B, these figures today further underline the fact.
At a time of such low growth it is a nonsense to cut so dramatically and so quickly on public expenditure. In Wales there is a big dependence on this sector for work, but more importantly it is the private sector that suffers most. Who builds the public housing, the schools and hospitals? No, not nationalized industries but the private sector.
Cutting the public sector also puts the skid under consumer expenditure. The message has certainly got through to each one of us that these are desperate times. And our reaction; not spend, spend spend. No, frugality is the order of the day. The trip to the shops become few and far between, sales go down, and just as night follows day, output goes down too.
So forget the Royal Wedding, Olympic tickets, warm weather and the Tsunami. The cause of our woes lives in a terraced house somewhere in central London.