David Prosser: Chancellor's predictions look too rosy

Outlook The latest disappointing manufacturing and industrial production figures do not tell us that the recession is going to last longer than we had begun to hope in recent weeks, though the widely respected NIESR pointedly said yesterday that it believed GDP had fallen again during the period between April and June, which would mean a fifth quarter of slowdown.

What the data does suggest, however, is that the V-shaped recovery of which Alistair Darling still talks optimistically is becoming more and more unlikely. We know we had the first half of that letter, as companies slashed production and began running down stocks in the face of the downturn. But while we may have reached the turning point, the way back up does not look so steep. L, or even the dreaded W, is the order of the day.

Arguing about the shape of the recovery in this way can seem facile, until you remember that the Chancellor's projections about the public finances are based upon the view he takes. If that view is too rosy, the public finances will turn out to be in an even sorrier state than the official figures suggest.

In that context, it is possible that Gordon Brown has made a mistake in delaying the next Comprehensive Spending Review (the dubious explanation being that it wasn't possible to have enough certainty about the economic outlook to take such decisions).

In the run-up to next year's general election, the spending promises the Government will be able to make are likely to be based on even more depressing assumptions about the public finances. And that will make it even tougher for Labour to convince voters that only the Tories would take the axe to spending if elected.