LONDON BRIEFING:AT 9.30am tomorrow Britain's first double-dip recession since the 1970s should be declared officially over, as the Office for National Statistics (ONS) releases growth figures for the third quarter of the year.
After nine months of falling output, the nation’s moribund economy is forecast to have returned to growth from July to September, with many economists expecting an increase of as much as 0.6-0.7 per cent in gross domestic product. Much of the bounce-back is due to one-off factors, such as sales of Olympic tickets, recovery from the bad weather earlier in the year, and the impact of the extra Jubilee bank holiday.
A plus sign will be encouraging, assuming the forecasts are right, but no real cause for celebration. The economy has effectively flat-lined for the past two years and could slip back into negative territory in the final quarter.
GDP is one of the most closely watched economic indicators, but can the data be believed? The numbers are often in conflict with other indicators, such as the record numbers in employment and falling jobless rate, or at odds with independent surveys. Even if the GDP number can be trusted, how useful a measure is it of a nation’s prosperity?
There is a big difference between the health of the overall economy and its population’s personal financial health. The latest study on “national wellbeing”, released yesterday by the ONS, showed that the fall in living standards in Britain has been deeper and more prolonged than in the two previous recessions. Net national income per head – which takes inflation into account and is thus a more accurate guide to real living standards – tumbled by more than 13 per cent since the start of the downturn four years ago. This is almost double the fall in GDP over the same period.
The ONS calculations are coming under fire from all quarters. Last week Goldman Sachs economist Jim O’Neill claimed the UK GDP data were even less reliable than the notoriously dodgy growth figures put out by the Chinese government. “The guys that publish the GDP data are worse at it than the Chinese,” he told a business conference.
That may be a little harsh on Britain’s number-crunchers but O’Neill, one of the country’s most respected economists, does have a point. Initial estimates of economic growth are based on a limited amount of information and a large amount of guesswork – and are invariably revised up or down, sometimes substantially.
For example, in the second quarter of this year, the initial estimate from the ONS was a contraction of 0.7 per cent. This was then revised up to minus 0.4 per cent - a substantial difference. Revisions are not just made over a period of a few weeks between the first, second and final readings, but can sometimes go back years. Thus only after memories of a recession – or boom – are fading might we discover that it was either longer, shorter, deeper or shallower than we had thought.
The ONS releases its GDP estimates earlier than most other countries, which it says is in response to user demand and it maintains that the figures act as a useful indicator of the economy in the short term. The data are eagerly awaited in the City of London and beyond, despite their limitations.
LONDON’S notoriously opinionated black cab drivers have another thing to complain about as administrators prepare to move in at Manganese Bronze, maker of the famous black cab.
Manganese once had the lucrative London market to itself, with new entrants deterred by the strict rules governing taxis there. Laid down by the Public Carriage Office, these include the requirement that black cabs have a turning circle of just 25 feet, said to have originated from the need to make the tight turn at the entrance to the Savoy Hotel. It certainly enables them to perform some hair-raising U-turns in busy London traffic. Hit by competition from a rival model launched by Mercedes-Benz, Manganese has been loss-making for several years. Earlier this year it discovered a £4 million black hole in its accounts and this month it suffered a costly product recall, with 400 models affected by a steering fault.
Refinancing talks with its 20 per cent shareholder, the Chinese car manufacturer Geely, failed, sadly leaving administration as the only option for a company that has been making one of London’s most familiar sights since 1948.
Fiona Walsh writes for the Guardian newspaper in London