Although the full ONS data aren’t live until 9.30 am BST today, there has as usual been Much-Leaking-in-the-Cabinet. Allegedly the numbers will show a 0.2% negative for GDP in Q2 2012. That follows 0.3% in Q1, and 0.4% in 2011 Q4. Do three Qs of negatives make a QE3? Not as far as the MPC’s vote last week is concerned, but then nobody has the answer to that equation.
09.35 BS update – the decline is a whopping 0.7%!
What we can observe, however, is this:
1. The MSM still insists on calling it a double-dip recession. It isn’t, because the ‘recovery’ from the first bit was manipulated with our money to make it look like that. There is no difference in my head between gold capping, Libor fixing, Zirp and QE: they are all forced, unnatural State attempts to hide the fact that our output base is too small, our economy lopsided, and our island ridiculously overcrowded.
2. Zirp and QE have helped the banks and the large multinationals (and kept the FTSE artificially high) but done nothing at all for the broader economy.
3. The Olympics trumpeted far and wide as a much-needed boost to Britain’s economy has so far been not only a growing debt we can ill-afford, but also a short-term disaster for economic activity in the capital. The day after we won it in 2005 I said this was a cast-iron certainty, so I’m now feeling suitably vindicated. But it’s hard to feel smug: while there is still hope that the economy will be boosted by the Games in Q3, it will not recoup the cost. Already, Government departments are back-tracking on the ‘benefits’ using careful phraseology such as “a limited overall boost from the staging of London 2012.”
And after the Olympics, what happens then? My bet is firmly on a slight upswing in Q3, and then an appalling Q4. How appalling it is depends on the size of the Euroblown backwash, and how quickly the banking contagion spreads around the world. But no spin and no talk about double-dips and ‘overly pessimistic numbers’ can disguise one simple fact: 75% of the UK economy is service-based, and a huge proportion of that crazy figure is financial services.
I’ll wager now that financial services as a sector has had an awful Q2 – but that Q4 will be close to a meltdown. And in a global recession, service industries are the first to contract.
What lies before us once the Olympic distraction has disappeared is a mind-concentrating slump of olympic proportions. And anyone who thinks otherwise either hasn’t done the maths, or never reads about events in the eruozone.
The depth of the slump was always going to be bad, but it has been exacerbated by idiotic fiscal and stimulus policies flooding big business with money, starving UK growth industries of working capital, and reducing the consumer’s ability to spend our way out of it to at least a limited degree.
There is no getting away from that, and under Labour it would’ve been just as bad. The UK needs fresh thinking in every sphere of life: but most of all, it needs to reform banking, dump the costly civil service, and break the stranglehold on power of politicians who – when they occasionally do know what they’re doing – work for themselves and their donors, not for us.