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Whisper it, but the British economy may in better shape than you think... - Spectator Blogs

7 February 2013

12:51 PM

7 February 2013

12:51 PM

Doom and gloom is all around. This is another winter, if not of discontent, then certainly of persistent grumbling. Optimism is as rare as a Scottish victory at Twickenham and, frankly, just as fanciful a thought. That, at any rate, is today’s conventional wisdom. Fleet Street looks to a Triple Dip recession and ponders what side dishes will best complement the Chancellor’s broiled reputation.

And yet, and yet, I wonder – hesitantly, I grant you – if all this is quite accurate. Fleet Street, like Westminster, is often fighting the last war. Worse still, it tends to presume that what has happened will continue to happen and that present trends will last forever and a day and so on. No wonder the press is always surprised when this proves to be not the case. It is almost touching.

But things will change. They will pick-up too. It is a matter of when, not, I think, if. And there is some reason to think that the economy is not quite so becalmed as the headlines sometimes suggest. Bill Jamieson makes the case for a tepid optimism today.

The good – or goodish – news is that: service sector companies expectations are their highest in eight months. Output is increasing, albeit more slowly than would be ideal. Retail sales were up 3% (in value) last month. Manufacturing employment is up (albeit marginally) for the first time in nearly a year. For the fifth month in a row the number of mortgage approvals increased and, happily, employment continued to rise. The number of full-time jobs increased whilst part-time employment fell in the last quarter. There are signs of business confidence returning.

Now we should not make too much of this. An economy limping along is hardly one in fine fettle. But a (temporary, we hope) limp need not be confused with a crippling injury.

All this reminds me of a sharp Tyler Cowen post from a while back in which he pointed out that, actually, large parts of the British economy are doing a little better than you think.

The slowdown in the last three months of 2012 (subject to revision soon enough anyway) was, at least in part, attributable to disruptions to oil and gas production in the North Sea (hey: the UK is oil-dependent too, not just a putative independent Scotland!). More significantly, perhaps, construction output fell by 11% in 2012.

Remove these elements from the equation and, according to Cowen, the non-oil, non-construction economy actually probably grew by about 0.7% in the last quarter. The service sector, he suggests, grew by 1.4%.

Now that’s not a prize-winning performance by any means but nor is it quite the disaster everyone presumes is actually unfolding. True, there is an element of But apart from that, Mrs Lincoln, did you enjoy the play? since the construction business is an important part of the economy. Nevertheless, it is a useful reminder that while hardly zipping along much – indeed most – of the economy is at least keeping its head above water. Even if only just. (And, of course, a construction recovery would benefit other sectors too.)

So, perhaps – and as I’m no kind of expert on these matters this is all conjectural – Things Are Not Quite As Bad As They Seem. Not glad, confident morning by any means but nor, either, some hideous dark night of the soul either. And, perhaps, there are grounds for hoping that a modest recovery might yet be seen this year.

How much any of this has to do with government policy is another matter entirely. If there is a proper recovery George Osborne will receive more credit than he deserves just as, in the present climate, he must thole more criticism than he entirely deserves too.

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