Cheer up: we’re robust enough to withstand a shock from China

Home from the hot Aegean, huddled by the fire as rain ruins the bank holiday weekend, I’m thinking: what gloom has descended since I’ve been away — and doesn’t it call for a round-up of cheerful news? So here goes. The UK economy grew by 0.7 per cent in the second quarter and a respectable 2.6 per cent over the past year. US growth has been revised sharply higher to 3.7 per cent, scotching our claim to be the fastest growing western economy, but George Osborne can still say convincingly that ‘we’re motoring ahead’ — and weak first-quarter performance can be seen as a blip rather than the revelation of doom it was declared to be by Ed (‘Where is he now?’) Balls.

Tax receipts are rising at an annual rate of 4.4 per cent, well ahead of the Office for Budget Responsibility’s forecast. Retail sales volumes are up 4 per cent from last year and have been particularly strong in the clothing sector. Lower than expected energy costs mean more cash left over for consumers to spend. Business investment showed healthy second-quarter growth, as did exports (though a strong pound may be a new threat on that front). Unemployment rose slightly in May and June after a long run of falls — but the narrower count of jobless benefit claimants continued to improve: down 200,000 on a year earlier, at 792,000. Wages have been rising at 2.8 per cent against near-zero inflation, and bonuses have been on an uptrend everywhere except in the financial sector, where they have fallen 10 per cent from last year — a healthy rebalancing. Productivity finally seems to be improving, too, with output rising faster than the number of hours worked.

How much of this progress will be knocked sideways by a global wave of bad news emanating from China? The short answer is less than last week’s headlines were shouting, not least because we’re in much more robust and flexible shape to withstand the shock than most of our competitors.