On the prospect of a double-dip…

July 23, 2010

The ONS today released their second-quarter preliminary estimate for GDP growth in 2010… Wait, where are you going? Come back, this stuff is important!

The electoral fortunes of the Lib Dems are currently at a low ebb, as the combination of unpopular budget decisions and a media squeeze push our poll ratings back towards pre-election levels. This is not unsurprising, but it’s doubtless causing some in the party consternation. If we’re to reverse our fortunes, we need to consider the likely state of the UK in five years’ time, which remains the most likely date of the next general election – giving up the coalition now would see us eviscerated by the electorate.

Our future fortunes depend on the growth of the economy in those five years – if we’re able to secure a strong recovery and a return to prosperity, we’ll be rewarded. If we have a double-dip recession, we’ll, well, not be. That’s why I’m sure the party’s strategists are examining today’s announcement with some relief – the stronger than expected growth figure of 1.1% would seem to indicate that the economy is indeed picking up. But what’s the actual picture?

This growth is primarily the result of expansion in two sectors: business & financial services, and construction. I predicted the continued expansion of financial services as a result of early cuts here, but construction is something else – indeed, the furore around the cancellation of the Building Schools for the Future programme seemed to imply that the likes of Balfour Beatty would be in for a rough ride indeed.

It’s possible that what we’re seeing in construction is the aftermath of Labour’s late-term spending spree, providing a temporary fake boost to the industry – part of this increase comes from extra Government spending, particularly on health. It could also be the impact of a shift in spending from cash savings into infrastructure to offset potential inflation. If it’s the former, I would anticipate the next quarterly estimate to remain positive thanks to continued expansion of financial services, but for the increase to be significantly less. However, resurgent growth in the financial sector means that the prospect of a double-dip recession – and thus further diminishment in our electoral fortunes – seems less likely.

Of course, this means we’ll have failed to diversify the economy away from finance thus far – but we’ve got another five years to achieve that.


2 Responses to “On the prospect of a double-dip…”

  1. bernmarx said

    Ah, I see another liberal sort slogging through Atlas Shrugged and blogging about it. 🙂 I’m nearly done with it myself, three chapters to go. (http://sisyphuswinced.wordpress.com/, if you’re interested)

    • declineofthelogos said

      Very interesting indeed! I’ve only read your work up to Chapter 8 to avoid spoiling things for myself – alas, my limited free time means my pace has somewhat slackened this week.

      We appear to be taking slightly alternative approaches to it – I am largely unfamiliar with Objectivism, and so am interpreting it in the light of the stances taken by the libertarians I have engaged in, whereas – at least the section of your blog I’ve read so far – you’re placing each chapter within an Objectivist framework. I look forward to catching up!

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