The UK Economy Rebounds Strongly
Today came the news which some of us expected but many had hoped for. The economy grew in the second quarter of the financial year by a whopping 1%. On an annualised basis this is more than 4% which compares incredibly well to the other major western economies. Of course GDP figures can be revised down as well as up but even some downward revision would still leave a significant boost to the UK economy. I still expect in time the so-called double-dip recession to be revised away and if that does happen economists will look back somewhat differently on the last year’s economic record and the falling unemployment.
Even the normally negative BBC was very upbeat about the growth numbers today. The one group which didn’t seem to share in the delight was the Labour front bench. The bunch of economic illiterates which comprise the Labour Treasury team were slow to comment but when they did could not bring themselves to welcome the news or congratulate the government. Instead they thrashed around to try to put a negative spin on the news and suggest that the 1% growth was somehow a sign of a weak economy. The economy is certainly not out of the woods yet but the green shoots of recovery are sprouting strongly. I just hope that the frost emanating from the Eurozone does not damage the recovery.
If the recovery is maintained strongly it will have a beneficial impact on the levels of tax receipts and therefore the borrowing and debt levels. It would also give the Chancellor a little more flexibility on spending and/or taxation levels. That can only be a good thing for public sector infrastructure investment and the level of tax on hard pressed families. I believe that we have turned the corner and are on the road out of the recession leading to lower deficits and a more sustainable balance between the public and private sectors. This is great news for the country and for the government as “Plan A” is seen by the public to be working. It is bad news for a Labour party which caused much of the deficit and has built their subsequent economic case around criticising everything the government does.
There will undoubtedly be further bumps in the road but today’s news is much better than predicted by most economic pundits and bodes well for the next few quarters. George Osborne will enter the next public spending round and Budget preparation with a spring in his step.