Big themes of the last 3 days;
- The stunning 1.1% quarterly GDP growth figure for Q1 – twice that anticipated by most UK economists – see Reuters
- Ernst & Young Item Club forecast interest rates to stay at 0.5% until 2014. The Item Club.
- House prices fall for the first time in 15 months – according to Hometrack, 0.1% in July, the first fall since April 2009. See here.
David Smith: Growth leaps but it’s a creditless recovery “. . .even amid the warm glow of an economy recovering faster than expected . . . strong growth alongside very weak lending adds up to a creditless recovery. The question is how long this creditless growth can continue.” Sunday Times.
William Keegan: The legacy of Lady Thatcher haunts Osborne still “The chancellor is right to want to break with the last two governments and actively rebalance the economy. But his obsession with deficit-cutting is old-school Thatcherism at its worst”. Keegan also queries the wisdom of the Chancellor banking on a continued loose monetary policy to offset a tight fiscal one . . . “At the moment the hawks on the monetary policy committee are in a minority. It would be unfortunate if we had a savage fiscal policy based on the assumption that monetary policy remained “supportive” and then the Bank acted in a way that made nonsense of that assumption – would it not?” The Observer (guardian website).
Roger Bootle fears an extended period of low growth and rising unemployment more than a double dip: Right, I’ll see your double dip and raise you an economic black hole “So far, the recovery has been better than almost anybody expected. But only when the cuts (and tax rises) start to bite will we see the real challenge. Accordingly, for the UK I think that the second scenario of several years of disappointingly weak growth should be regarded as the central case. Mind you, it lacks a catchy name to compete with “double dip”. Did I hear someone suggest “economic black hole”?” Daily Telegraph.