Friday, January 08, 2010

The economy freezes

Recent events may end up hastening the end of Gordon Brown’s premiership.

No, not the witless flailings of a couple of has-beens. I mean the weather.

With the transport system struggling and people’s general unwillingness to go outside, severe weather like this does have some short-term economic impact. Not a lot, but if this very cold spell lasts much longer it could become statistically significant.

GDP growth figures for the last quarter of 2009, due out in a few weeks, are almost universally expected to show that the recession is over. However, even before the snow, there have been concerns that this quarter might not be so impressive, especially with consumers taking a breather after the December sales and the rise in VAT.

The chances of negative growth for the current quarter have increased, then – not so much a ‘double-dip’ recession as a wobble, but distressing all the same. The NIESR’s monthly GDP estimate, due out in February, should give us some kind of steer on this. But the official figures for the current quarter will be published in late April – shortly before the likeliest election date. And far enough away for memories of the snow to be fading.

Would Brown want the announcement that his economic recovery has failed to be the last thing voters hear before they go to the polling station? If not, then the odds of an early election have just shortened.

1 comment:

danivon said...

I think you are over-worrying about this. We are still awaiting the figures for 2009Q4, which are expected to show a return to growth. If so, that's more likely to have an effect on confidence in this quarter. Improved confidence is likely to lead to more activity, which should bolster growth.

Besides, for many industries, a day lost to snow will be made up for.

eg1: food retail - people who couldn't get to Tesbury's on Thursday will still need to buy bread and milk etc on Friday.

eg2: people will catch up with the essential things when they get back, and the less important stuff was probably getting in the way anyway.