The growth report – an economic health check for January
A few weeks ago I sketched five reasons why the UK economy is going to struggle to grow this year. To me, these aren’t reasons to despair, but reasons to ask more questions about growth in the first place. Like a dog chasing its tail, pursuing growth in a fully developed, over-consuming society is a waste of energy and ultimately futile.
Since infinite growth in a finite universe is illogical, I believe a post-growth economy is actually inevitable sooner or later. We’ll get there eventually, hopefully by planning it and steering ourselves there, rather than ending up there by painful default. The occasional growth reports that I put together here are really a sort of check-up on our progress, intentional or otherwise, towards that post-growth society.
So in review, here’s January’s economic health check on the UK economy.
- The Office of National Statistics recently announced its latest quarterly growth statistics, and Britain’s economy shrank by 0.5% in the last three months of 2010. This was due in large part to a severely cold December, but growth would have been “flattish” even without that.
- New inflation figures were also released, clocking in at 3.7%. This too was higher than anyone expected. Since wages have stagnated, it means that we’d actually be getting poorer as individuals even if the economy was growing.
- Inflation means there’s too much money in the system, which is counter-intuitive when the banks are apparently reluctant to lend. The way to control inflation is to raise the price of money – the interest rate. That’s still being held at a record low at the moment of 0.5%. This is a huge dillemma for the monetary committee. If they raise interest rates, it will be more expensive to invest, and low investment means lower job creation at just the time when the government needs aggressive expansion to offset its budget cuts.
- The FAO’s Food Price Index is at an all time high, and the price of oil tipped back towards $100 a barrel because of concerns over Egypt’s stability (and thus access to the Suez Canal).
- Data from this morning shows the average house price falling o.1% in January.
In response to this welter of bad news the government has promised a “budget for growth” in March.