Outlook Sir Mervyn King said this week that an economic recovery is in sight. The trouble is that anything is in sight so long as your binoculars are powerful enough. Despite the better than expected 0.3 per cent GDP growth in the first quarter, I remain sceptical.
And that's because I've been thinking about the expenditure components of GDP. There are four sources of demand in the economy – consumer spending, government spending, business investment and net exports. And I can't see any of them picking up strongly anytime soon.
Consumer spending? We learned this week that workers are still suffering real pay cuts, as inflation continues to outstrip wage rises. People are also still struggling under historically large personal debt burdens Government spending? We're only midway through George Osborne's fiscal consolidation. Business investment? Why would captains of industry invest if their customers have little money to spend? Exports? Can you see demand from the eurozone – our biggest single trading partner – picking up in the near future?
Talk of green shoots has been wishful thinking for the past three years. I can't see anything in the present data that makes me think that, as the saying goes, this time it's different.