Wednesday, 27 April 2011

How the snow spin has finally paid off for George Osborne

George Osborne didn't do much for his credibility as Chancellor in making quite so much of the snow effects when the GDP figures of the last quarter for 2010 were released.

(In what is becoming a characteristic pattern, Number 10 and David Cameron ditched the Osborne line after widespread mockery, to admit that the underlying non-snow affected picture was of a flat economy, neither expanding nor contracting).

The revised figures showed a contraction of -0.5% of GDP.

Now the eagerly awaited first quarter of 2011 figures show GDP up + 0.5% on that previous quarter (subject always to the caveat that the preliminary figure is subject to revision). Or exactly where we were six months ago.

[UPDATE: Almost. As Guido Fawkes points out on twitter, a 0.5% increase on the reduced figure doesn't make up for the 0.5% fall from from a higher base: "100 x 0.995 x 1.005 = 99.9975. You are being uncharacteristically generous to Osborne. Wrong direction over 2 quarters". We do of course try hard to find nice things to say about George Osborne and other political opponents where we can.]

Cue Treasury briefings about a 'return to growth' and 'good news', about an economy heading in the right direction.

Yet the ONS points out that this could be an entirely "arithemetic effect" - we have a snow related -0.5% and now a recovery of that lost ground in this quarter.

That's in effect zero growth in the last quarter, and zero growth in this quarter

"Abstracting from the snow, we have an economy on a plateau", said the chief economist of the ONS".

Having deployed the snow as an excuse, one can't logically claim this as growth.

The 0.5% is the mid-range what the markets expected, though the independent Office of Budget Reponsibility was more optimistic at 0.8%. So an important question is whether the OBR now downgrades its forecasts for the remaining three quarters, which could seriously dent the Chancellor's projections for deficit reduction.

But expect to hear the Chancellor ignore the weather effects now and simply talk about the headline figure as a return to growth.

Consistent with that is the Treasury pointing out that US GDP is up 0.5% in thie first quarter too, implying we are even-stevens with the Obama stimulus approach.

But we're obviously not.

But as economist Duncan Weldon tweets, that involves a sleight of hand:

HMT is pointing out that 0.5% is same as US. But US didn’t shrink last quarter. Totally bogus comparison. Grasping at straws there.

Snow, damned lies and statistics?

Peer through the fog and one thing is clear.

There's no growth, George.

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