Wednesday, March 28, 2012

Behind the pasties and petrol cans....

When we've finished worrying about the pasty tax or whether the Cabinet Office Minister can authorise us to store industrial quantities of petrol or diesel in our understairs cupboards, the economy is still looking in pretty poor shape. Not that this will come as any surprise to those of us at the very sharp end.

With today's announcement that Q1 and Q3 performance were both slightly worse than expected, the reality of an economy bouncing along around the edge of a double dip recession has been confirmed. The graph at left is from the FT Alphaville blog and shows the recovery rates from recessions - you can see that the current downturn, if measured from Q1 in 2008 is already deeper in terms of lost GDP and slower in terms of recovery than the typical recession from the last period of Tory government. It is also now convincingly worse than that of the 1930s and the trend isn't looking good.

If you look closely, you will see that after the precipitous fall during 2008 and early 2009, the economy started to recover, a recovery that ceased around Q3 of 2010, the point where this government's policies started to properly bite. Since then, we've stagnated, with quarters of slight growth alternating with quarters of slight decline. If the trend running when Labour left office had continued, we'd have returned to parity with 2008 about now. The most optimistic view, if steady growth returned, would see parity restored sometime in 2014, but you would need to show evidence that growth is returning.

It may be a warm spring, but it looks like it won't be a great summer.

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