How long can growth sustain itself without overseas demand?
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If ever a chancellor looked unable to change the course of his country’s economy, it is this one.
While the domestic demand miracle continues to see Britain grow faster than most of its peers, its longer term fortunes are, perhaps more now than ever, inextricably linked to those of its trading partners abroad. And, as the slew of eurozone data out today showed, our trading partners across the Channel are sliding inexorably backwards again.
Service sector figures produced by the Markit research group, which give a pretty accurate preview of the official economic data, showed eurozone growth now at a 16-month low, suggesting its growth rate for the final quarter of the year will be just 0.1 per cent.
Within that, Spain, France and the powerhouse Germany all showed slowing growth or, in the case of France, worsening contraction. Against that backdrop, even if – as seems likely – Mario Draghi loosens the monetary purse strings at the European Central Bank, Britain’s main export markets are getting worse.
The Government will take heart that Britain’s PMI score rose ever higher. It’s been fuelled by strong domestic demand, which continues to baffle economists. But how long can British growth sustain itself without overseas demand?
We could find the answer in the low oil price, which has successfully helped keep inflation down and given the Bank of England continued scope for easy monetary policy. With Opec’s refusal to curb supplies for another six months, crude prices are stuck low for the medium to long term.
It’s a good job for the Chancellor that it is, but it’s yet another factor completely out of his control.
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