The economy grew by 0.6 per cent in the first quarter and some people want to retain the bunting that was put up to celebrate the other and more famous (Royal) George. But actually I wouldn’t, as it would be rather premature.
I see little prospect that this growth rate will be sustained into the future, despite what George Osborne says. There is scant evidence that any of the four components of growth – investment, consumption, trade or government are at blast-off stage. And net business lending continues to fall.
We need to remind ourselves that the economy has only grown 1.8 per cent in total over the past 11 quarters and, of that, 0.7 per cent is down to Labour’s investment in the Olympics. In contrast, over the same period, both Canada and the United States grew by 5 per cent. Most forecasters are not expecting much, if any, growth in the second half of the year.
The economy that Osborne inherited when he took office was also growing at 0.6 per cent per quarter, and that continued for a couple more quarters until his reckless austerity policy and talking down of the economy took effect. Plus he still has no growth plan. Moreover, the last time there was growth of 0.6 per cent was in the third quarter of 2011 which was followed by -0.1 per cent, zero and -0.5 per cent the following three quarters.
The level of GDP, according to the Office for National Statistics, is still 3.3 per cent below its starting level at the beginning of 2008, which means that just over half of the lost output has been restored. The Great Depression saw output fully restored in four years.
Even contemplating raising rates, as the former Monetary Policy Committee member Andrew Sentance has ludicrously suggested, especially given the additional fiscal tightening that is in train, would kill what little growth there is, stone dead.
The Chancellor, George Osborne, is surely putting pressure on his disciple Mark Carney to do lots more quantitative easing and soon. Who said recovery?
David Blanchflower is professor of economics at Dartmouth College and a former member of the Monetary Policy Committee