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Subdued reaction to GDP figures
12:00am Wednesday 31st October 2012 in Business
YOU might expect that last week’s announcement that the UK is officially out of recession would have sparked wild celebrations at the North East Chamber of Commerce, writes.Ross Smith, NECC Director of Policy
And surely the fact the quarterly growth rate was the fastest for five years would have prompted us to crack open the champagne.
But in fact, I was fairly ambivalent about the news of 1 per cent growth, just as I had been about the estimates of significant contraction in the first two quarters,
Because the notion that something has radically changed over the past three months that changes the underlying conditions for business seems a little bit far-fetched.
Then, NECC members were working hard and delivering growth in their businesses against a backdrop of pretty challenging trading conditions. Now – well, it feels remarkably similar really.
So why do the GDP estimates suggest that there has been a sudden uplift in the economy?
Partly it’s a statistical quirk caused by the extra Jubilee Bank Holiday in Quarter 2. That made output then look artificially depressed, which means the growth in Quarter 3 will consequently appear a bit bigger.
And partly it’s down to the Olympic effect, which has been more significant in London for obvious reasons, though it should give a longer lasting fillip to businesses in all parts of Britain.
But I can’t help feeling that the quarterly estimates continue to be a bit erratic. The figures over the past couple of years have bounced up and down like Steve Cram celebrating a Mo Farah gold medal. The Bank of England’s famous ‘fan charts’ suggest even they are a little sceptical that growth has been as low in the early part of this year as the Office for National Statistics suggests.
Our own surveys of North East businesses show what feels like a more realistic picture: broadly speaking, businesses are growing but not yet fast enough to make it feel like a robust recovery or to overcome what’s happening in the public sector.
That’s not to say last week’s estimate doesn’t matter: lots of people are interested in these figures and if it leaves them feeling a bit more confident about the UK economy, that can only be a good thing.
But just as we refused to hold a wake for the economy in Quarter 2, we’ll skip the party for Quarter 3 – because business as usual never really went away.