Economic shock a warning

I could be all tribal and also claim like the chancellor that the economy contracted by 0.5% in the last three months of 2010 because of the snow. But while I can see this being a factor, Manufacturing still went up by 1.5% which means the weather was not an overriding factor as manufacturing workers still turned up to work and good where still delivered and made.

 

I think that this is generally a very bad sign for the coalition as well as the country. It's a shock for a reason, because its so unexpected. The construction industry fell the most, decreasing by 3.3% in the quarter. This I expect is down to so much spare capacity in the commercial sector and the very slow housing market.

 

Of course politically the government will claim that this is not down to policy and they won't change their plans. But If this continues I expect the government to change their plans accordingly. This is because if the parties in the coalition want to win votes then they will need to keep the economy on track, otherwise you can expect Labour to win a majority in the next general election.

 

Coalition, You have been warned!

I'm not the only Lib Dem who is worried see Caron's Musings post, http://carons-musings.blogspot.com/2011/01/ok-im-scared-about-economy-now-lib-dems.html

Double dip gamble‏

There has been all kinds attacks on the coalition cuts all over the web and warnings of a double dip recession after yesterdays Bank of England forecast of a 'choppy economic recovery'. While less than 3% growth is not great its still not a double dip recession so lets not panic just yet. The way some have reacted you would think that we are back in a recession.

If we keep on talking about a double dip recession it will happen because even those that can spend or even need to spend well hold of on those planned purchases and ties goes for business too.

For what it's worth I think government spending should be cut as it cannot be sustained and I would like to see admin inefficiencies removed. By the same token I would like to see more capital projects like in the states for example the High-speed rail plans is a great example. The good thing about capital spending is that we all get a permanent asset which the country can use.

One of the real keys as Mervyn King said is small business bank lending. I believe the sooner we split up the banks the better so they can get on with lending funds to business.

I'm willing to admit as a Lib Dem that I don't fully agree myself with having cuts too quickly but I do agree that we must have the cuts. I'm somewhere between the coalition and the Labour party on this (I guess that's what makes me a Lib Dem right).

I do think however that this is a gamble and a fine line between pleasing the markets (the reason why we are cutting to keep the interest payments down and rate) and not going into a double dip recession. If the banks can get the money flowing then there won't be a recession but personally I'm not enjoying the ride.

Hold on tight people it's going to get bumpy but try not to panic.

Todays Links related to this Norfolk Blogger postDouble Dip Recession ? We were warned !