Friday, 27 August 2010

Growing pains?

The Office of National Statistics has revised up the growth figures for the second quarter by 0.1% to 1.2%. These are the best figures for nine years, and are mainly due to a large boost in construction projects.

This is all good in the short term, but these figures are based on action taken in the past year by the previous government. Business leaders, including Graeme Leach, the Chief Economist of the Institute of Directors, who told the BBC;

"Instead of looking in the rear view mirror at what has passed, it would be wiser for us to keep our eyes on the road ahead. We don't expect this level of growth to be sustained through the second half of 2010. But whether or not this slide will turn into a quarterly decline or a double-dip recession remains highly uncertain."

Many economists have predicted a slowing in the next few months, although it will be impossible to tell until the effects of the government's spending review and the VAT rise, announced in the budget, as well as the ending of capital projects, have had time to take effect. Therefore, it will not be until this time next year we'll really know the economic situation.

As Labour Party leadership contender Ed Balls said;

"The question is whether that pattern, which you see confirmed today, which I think is a vindication of what we were doing in government, whether that pattern continues or whether it goes into reverse?"

The future path of the economy remains uncertain, and outside factors, US growth showed a slight slowing in the same period, as well as government policy will affect the recovery. As Mervyn King said recently, the recovery will be 'choppy' and there will be varying sets of figures forthcoming, with no set pattern for some time.

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