GDP figures: A False Dawn?

Posted on: 27.07.2010    10:52:01

Is it me? I just can not reconcile the “stonking” GDP figures with feedback coming from the coal face.

There may have been a small statistical element of catch up in that historically numbers have tended to be understated but even making an allowance for this the outstanding results are at odds with the feedback we are receiving. This is endorsed by sharp increase in firms looking at redundancies.

Uncertainty has returned. Previously bullish entrepreneurs are increasingly downbeat.

For many a so-called Bath shaped recovery – a long period of flat, low-single-digit growth – is now the best case scenario and the bottom of the Bath is likely to get wider. A double-dip recession is not to be ruled out – as public sector austerity has still to feed through, rising personal taxes and a fragile global economy smother the tentative recovery we have seen to date.

So are we all being too gloomy? Is the economy proving to be more resilient than we thought?

The coming 12 months will see real household incomes fall as personal taxes rise, wage freezes bite and tens of thousands of public sector workers lose their jobs. Unfortunately the second quarter’s GDP figures may well be as good as it gets for some considerable time.

Apologies to all the optimists but you need to take a reality check and be prepared to tighten your belt by an extra notch unless you are aware of an economic well of demand hidden from the rest of us.



Author: Chris Slay

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