Thursday, 28 October 2010

The fallacy of 0.8%

Some predicted 0.6% GDP growth, some predicted 0.4%, what did we get: 0.8%. Fantastic news, it would appear George Osborne's faith in the economy coving the back lash from the public sector cuts was correct.
George Osborne needs around 1 million jobs to be created, with the 0.8% growth came an decrease of 0.1% of unemployment. The Economy is creating jobs! So all the predictions of double dip, all the apocalyptic judgements on the spending review are wrong, its all up from here.

What Mr Osborne will not be drawing attention to is that these figures are from the 3rd quarter, thats July, August and September. This is way before the spending review get chance to sink its teeth into the economy, it is in fact its before the new Government had done anything. The Con-Dem rejoice they really should be thanking the past Government. I'd go as far as saying this 0.8% is the fall out of the stimulus package that has now been reversed.
If your looking for more practical evidence not to get your hopes up, consider this.
Office for national statistics:
-Government and other services rose 0.6 per cent
-Construction output rose 4.0 per cent in the third quarter of 2010, compared with an increase of 9.5 per cent in the previous quarter
Construction is on the slide from the previous quarter indicating a downwards trend, the cancelation of Government contracts is not yet applied to these figures (with them being out of date) and other indications such as slowing housing market appeared after these figures have been calculated.
3rd quarter of 2008
 Construction is a large chunk of GDP if it starts to decline it could multiply across the whole economy. The 0.6% growth in Government services is almost certainly going to decline with the spending cuts. Then manufacturing will decline in the 4th quarter as well as there will be less demand for manufactured goods in the public sector (e.g: Fighter Jets..) and export demand for manufacturing is shaky with Europe  on the brink of a second economic collapse.

Don't be too quick to make judgements at first glance from one figure, analysis. I'm standing by my predictions of a double-dip.

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