Reading too much into quarterly GDP figures is, of course, a mug’s game. They’re noticed mainly by avid Westminster-watchers and frequently revised both up and down.
None of that means they don’t matter, though. They frame the way politics is reported in the here and now. And that can affect what happens in the future. They can create momentum, or they can stop it dead.
A triple-dip recession, against market expectations of a modest 0.1% increase in GDP, would’ve been a severe blow to the Coalition’s message that, surely but slowly, the medicine’s working. As it is, the actual 0.3% increase in the first quarter of 2013 is sufficient to allow the Government to let out a deep sigh of relief:
Nick Clegg: We have still got a lot of work to do & will continue to work hard to make sure the economy grows from strength to strength #GDP
— Deputy PM (@DPMoffice) April 25, 2013
Look at the stats and you’ll see the news really isn’t anything to celebrate. Yes, the economy has stopped contracting. But it hasn’t really started growing. Consider these four facts:
- output is just about back to the level of where it was 6 months ago;
- the deficit is stubbornly stuck at £120bn, the level it was at last year and is expect to be at next year;
- the unemployment rate is expected to stay broadly static at 7.9%; and
- average earnings increases are currently well behind inflation.
However, however, however… Elections aren’t — to the frustration of economists and, at the moment, opposition politicians — just decided by economics. Elections are also decided by people’s perceptions, in particular their perceptions of whether the current government is mostly responsible for the mess and whether it’s mostly doing the right thing to get us out of that mess.
And as it stands, Labour is still blamed more than the Coalition for the economic mess we’re in; and people broadly accept the Coalition view that public spending cuts now are necessary for the long-term good of the economy.
Labour has another problem, one it can do nothing about. There is no control group to compare the Coalition’s approach to the economy with Labour’s over the lifetime of this parliament. This means that even modest, sluggish, barely perceptible growth by the time of the next election will be claimed by the Government as success. And however much Labour will claim that growth has been lower than it would have been under them there will be no evidence to back it up.
The Coalition will hope that the year March 2012 to March 2013 was its nadir, its mid-term slump, and that it has now bottomed out. The economy may be anaemic, but its heart is still beating fantly. By 2015 the electorate may even be able to feel its pulse.
First-term governments are often cut some slack by the electorate (in the same way Tony Blair’s inability to turn round public services in his first four years was judged sympathetically). The simple fact is that if the economy is growing Labour will find the 2015 general election tough, tough going.
* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.