inside business

The economy is stalling, but voters haven’t noticed just how miserable the Tories’ record is

The state of the British economy is barely registering on the election campaign trail, writes James Moore

Tuesday 10 December 2019 16:30 EST
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A contraction in manufacturing was a feature of the latest official economic figures
A contraction in manufacturing was a feature of the latest official economic figures (PA)

It’s the economy, stupid. That line became a part of America’s political lexicon during the 1992 presidential campaign after one of Bill Clinton’s strategists, James Carville, scrawled it on a whiteboard.

It’s a slight misquote. He actually wrote, “The economy, stupid”. But the sentiment’s the same whichever formulation you prefer. It reflects the fact that Americans will typically forgive any character flaws in their commander-in-chief if USA plc is motoring.

That should be a cause for serious concern for the Democrats because it’s still creating thousands of new jobs. Some 266,000 in November, according to US Labor Department figures released on Friday.

On this side of the pond, the picture is somewhat different. The economy is all but absent from a UK general election campaign even though it’s stalling badly.

Official figures revealed output flatlined in October when compared to the previous month, after two consecutive declines. The City’s consensus forecast called for a small rise (0.1 per cent).

The August to October three-month period was the weakest for more than 10 years. The service sector managed a modest expansion (0.2 per cent) but that was offset by a contraction in manufacturing (0.7 per cent) and construction (0.3 per cent).

The figures pushed down the annual growth rate from 0.9 per cent to a seven-and-a-half-year low of 0.7 per cent.

The UK’s trade deficit, meanwhile, jumped to £5.2bn in October, a seven-month high. Fed up of the long list numbers? There’s more where they came from. I could probably fill a column with them. Or I could just write the word “ROTTEN” and leave it at that.

The faltering stake of the UK economy has barely registered during the election campaign, and it should have. With so many barbs being thrown at Labour over its plans, the ROTTEN record of the Conservative Party deserves capital letters. It is as important as the prime minister’s notable lack of anything resembling character.

After 10 years of needlessly cruel austerity, starving the UK of investment and growth, we now have an economy falling on its face thanks to the Conservative Party’s obsession with, and ruinous mishandling of, Brexit. The credit they get for supposed economic competence is entirely undeserved.

But as miserable as the latest figures are, it’s hard to see them changing many (or any) votes.

Part of the reason for this is, of course, that employment has largely held up. Carville really should have said “Jobs, stupid” or maybe “It’s jobs, stupid”.

In the UK, by contrast to the US, the numbers have been showing signs of weakness but not enough to really hurt.

Could they knock a new government of course? That remains to be seen.

Paul Davies, chief UK economist at Capital Economics, thinks we could see an economic contraction in the official fourth quarter of the year, which runs from October to December.

A lot is, obviously, riding on consumers, and what they do during the festive season. The UK consumer has repeatedly bailed the economy out. It’s less often noted that this has been at the expense of their building up a mountain of unsecured debt.

Davies thinks the fourth quarter could, however, prove to be a low point. That means the UK should return to something resembling growth next year, although it will be slow and, crucially, dependent on an orderly Brexit and a trade deal with the EU.

In other words, the outlook is as uncertain as ever. If the end result is a backdoor no-deal Brexit, the economy will become a much bigger part of the UK political discourse. Unfortunately, by then it will be too late. Right now a very small word “if” looms very large.

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