The coalition can breathe a little easier today. The economy returned to growth in the first quarter of this year, avoiding a double-dip recession. It expanded by 0.5 percent which is in the middle of City economists’ forecasts but below the OBR’s prediction of 0.8 percent.
Recoveries are generally choppy and particularly so when coming out of a debt-induced recession. Labour, though, will see these numbers as a further chance to claim that cuts have sucked the confidence out of the economy and that Britain is just bumping along the bottom. This, obviously, isn’t the whole picture. The deficit reduction plan has, crucially, kept the cost of borrowing low and enabled a continuing monetary stimulus. The coalition will argue that it is steering the economy past a Portuguese situation while also preventing another recession. I suspect we’ll see these battle lines staked out at PMQs today.
One thing to watch for in the coming months is whether these numbers are revised. According to these figures, construction declined by 4.7 percent. This is a far bigger decline than analysts expected.