Editorial: Too soon to celebrate an economic recovery

One per cent growth is not to be sniffed at, but the worst is not necessarily over yet

Share
Related Topics

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.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Associate Recrutiment Consultant

£18000 - £23000 per annum + Uncapped OTE: SThree: SThree Group have been well ...

Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE: SThree: Real Staffing Group is seeking Traine...

Year 6 Teacher (interventions)

£120 - £140 per day: Randstad Education Leeds: We have an exciting opportunity...

PMLD Teacher

Competitive: Randstad Education Manchester: SEN Teacher urgently required for ...

Day In a Page

Read Next
 

Letter from the Political Editor: Cameron's unexpected tax pledges give the Tories home advantage

Andrew Grice
President Barack Obama walks with U.S. Secret Service agents to Air Force One at Los Angeles International Airport in Los Angeles, Calif., May 8, 2014.  

Obama's Secret Service has become sloppy with its delusions of Hollywood grandeur

David Usborne
Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Time to stop running: At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity

Time to stop running

At the start of Yom Kippur and with anti-Semitism flourishing, one Jew can no longer ignore his identity
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence