George Osborne was – wisely – far from triumphalist yesterday. Given that official figures showed Britain's lacklustre economy bouncing back from recession with the fastest quarterly growth rate for five years, the temptation to talk about "green shoots" of recovery must have been strong. Instead, the Chancellor restricted himself to the more measured reflection that the economy is "healing" and "on the right track".
Caution is well justified. Although a healthy 1 per cent expansion in the third quarter, after nine months of contraction, is not to be sniffed at, it would be inadvisable to conclude that the path to sustained recovery is now a smooth one, or even that the worst is necessarily over.
First, the specifics. Sad to say, just as one-off factors (most notably the extra Jubilee bank holiday) helped drag the economy into a double-dip, so similar distortions (including both the catch-up from the Jubilee, and the Olympic Games) account for much of the recovery. Such a significant correction in the three months to September therefore raises no small risk of a another slide backwards in the fourth quarter, as the various distortions finally work their way out of the system.
On the plus side, yesterday's good news does chime with a number of other positive developments in recent weeks: unemployment continues to fall, inflation is at a three-year low and retail sales improved last month. But, in this case at least, even a clutch of swallows is far from a convincing summer. Not only do surveys of both businesses and consumers suggest the outlook to be darkening again, the all-important construction sector also remains stubbornly ailing, shrinking by another 2.5 per cent between July and September. Less of a recovery, then, than a bumping along the bottom.
Nor is the longer-term outlook much cheerier, with individuals, businesses and Government all paying off their boomtime debts, and the euro crisis adding extra gloom and uncertainty.
Meanwhile, if there were any lingering doubts as to the scale of the damage wrought by the financial crisis, they were dispelled by the Governor of the Bank of England this week. In a profoundly downbeat analysis of Britain's prospects, Sir Mervyn King warned that the problems in the banking system are far from resolved. More sour loans and recapitalisations are to come, he said, and until they do there will be no meaningful recovery. No wonder bank lending remains sclerotic, even with the latest Funding for Lending scheme. No wonder, either, that Sir Mervyn, while not ruling out another round of quantitative easing, cautioned that "money-printing" cannot do much more by itself.
Against such a background, the Chancellor is sensible to limit his jubilation. But if the return to growth does not signal that Britain is out of the woods, it does provide Mr Osborne with some much-needed political breathing space. Notwithstanding recent improvements, the Chancellor is expected to use his Autumn Statement to admit to a significant overshoot in government borrowing, forcing him to delay plans to start paying down Britain's stockpile of debt. The task is still a politically painful one, but with the economy expanding again – albeit nominally – Mr Osborne can at least hope to ward off the charge that his deficit-reduction strategy is in tatters.
Better still, the Chancellor must also use his statement to set out compelling measures to stimulate further growth. He is right to talk guardedly of the economy "healing". And he is right that there is a considerable way to go. He has not yet convincingly explained what he will do to help.