There’s a danger in reading too much into the seemingly endless outpouring of new economic data.
One day growth is quickening, the next day it’s slowing. A succession of experts and authorities make much-publicised statements warning that the risk of a double dip recession is growing, but that it remains unlikely.
So a health warning attaches itself to all new economic data: ‘This is evidence – it isn’t proof’.
So in that spirit, here’s some new economic data that provides evidence – but not proof – that Britain’s economic recovery is running out of steam even before the government’s public funding cuts kick in. (It’s taken from The Times this week – so the links won’t work without a subscription.)
First, the services sector – which accounts for more than 75 per cent of Britain’s GDP – grew at its slowest rate in almost 18 months in August, while a Markit/CIPS report indicated that it is likely to shrink further. The sector is cutting jobs at the fastest rate since last October.
Meanwhile, a separate Market/CIPS report showed the manufacturing sector growing at its slowest rate in nine months – driven by the slowest growth in new orders for more than a year. The consumer goods sector is struggling in particular. Manufacturing across Britain’s trading partners in Europe is also slowing down.
Finally, growth in the construction sector is also dropping off, particularly in the residential sector – which is of course dominated by private sector activity. The public sector-heavy civil engineering sector has been growing strongly – but the public funding cuts can be expected to eat into this over the months to come.
We should not forget that the economy is still growing – but that the evidence suggests that growth is slowing markedly. If there is a convincing reason why the coalition’s imminent public spending cuts, making hundreds of thousands of public sector workers redundant and economically inactive, won’t harm the economy just as it appears to be running out of steam, I haven’t seen it.
Of course, The Times – which published all the above reports – still supports the coalition’s cuts agenda. We can only speculate as to whether its leader writers actually read their own paper.