David Blanchflower: Recession looms as the Chancellor lays waste to growth
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Your support makes all the difference.It came as little surprise that GDP for the fourth quarter of 2011 came in at minus 0.2 per cent. There isn't much prospect that the GDP number will be revised up either, given that over the last five years the average revision has been down. Indeed, there is every prospect that the next quarter will also be negative, which would fit the technical definition of a recession, of two successive negative quarters.
Unemployment is increasing fast and is set to rise further through 2012. As Ed Balls pointed out, the claim that this is all due to the eurozone is without foundation given that exports have been rising. Shamefully, George Osborne still has no growth plan and, unsurprisingly, there has been no resurgence in the private sector as he had expected. His austerity programme is a growth destroyer. There is a better than 50/50 chance that we are in the double-dip.
Of particular concern is that banks are still not lending, as shown by the Bank of England's Trends in Lending Survey. Plus there is no sign that the recently announced credit-easing programme has allocated as much as five quid to small firms.
The drop in output was especially large in manufacturing, which fell by 0.9 per cent on the quarter and where output has still not returned to its pre-recession peak.
The depreciation of the pound by around 25 per cent should give a fillip to domestic producers, but it hasn't. I attribute this as much as anything to Osborne, Cameron and Clegg talking down animal spirits by falsely claiming the UK was bankrupt and comparable to Greece, which scared businesses away. The Bank of England's agents' report out yesterday showed some investment on hold because of uncertainties.
If growth comes in negative in the next quarter, as it probably will, Osborne's strategy will have failed and he should quit. No more excuses. Time for Plan B.
David Blanchflower is the Bruce V Rauner professor of economics at Dartmouth College. He was a member of the MPC from 2006-09
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