GDP figures confirm economy is stagnating

The second estimate of Q2 GDP growth released today confirms that the economy expanded by just 0.2 per cent, reports IPPR senior economist Tony Dolphin.

The second estimate of Q2 GDP growth released today confirms that the economy expanded by just 0.2 per cent. This means annual growth is down to just 0.8 per cent and the economy has grown by only 0.2 per cent over the last three quarters.

There are multiple causes of this slowdown in growth, including:

• The high food and energy prices that are squeezing households’ spending power;

• January’s increase in VAT;

• The government’s public spending cuts;

• Weaker demand for UK exports as a result of turmoil in the eurozone; and

• Low business confidence and a consequent reluctance to borrow, invest and hire new staff.

There is little to suggest the third quarter will be any better. Consumer and business confidence remains depressed. Retailers report little sales growth. Unemployment is increasing again. And there are more increases in gas and electricity prices to come, which will squeeze households’ spending power even further.

This is not yet a double-dip recession, but it is almighty close to one. The chancellor’s gamble that fiscal consolidation and low interest rates would lead to a vibrant recovery led by the private sector is clearly not working. The time has come for a change of course.

The fiscal plans should be revised to allow the deficit to be eliminated over a longer time period. More immediately, the chancellor should announce an easing of this year’s fiscal squeeze through a tax cut targeted at those on low incomes or an increase in capital spending that would support the beleaguered construction industry, improve the country’s infrastructure and create much needed jobs.

The Monetary Policy Committee also needs to do its part. At its next meeting it should increase the scale of quantitative easing by £50 billion and plan a further £50 billion increase if things do not get better in coming months.

Not all of the causes of the current economic weakness could have been predicted or are under UK policymakers’ control – but that is no reason for inaction. Without growth, the economy cannot hope to tackle its two major problems: high unemployment and the budget deficit. The private sector is not delivering the growth that the government hoped it would. Now is the time for policymakers to act to support it.

18 Responses to “GDP figures confirm economy is stagnating”

  1. oh, darling.

    GDP figures confirm economy is stagnating: http://t.co/nuHPMuF writes @IPPR's Tony Dolphin

  2. Jess McVitie MP

    RT @leftfootfwd: GDP figures confirm economy is stagnating: http://t.co/chQQcHN writes @IPPR's Tony Dolphin

  3. David Nash

    Little to suggest that GDP growth will pick up in Q3 says my colleagueTony Dolphin http://t.co/dwBDypU #IPPR

  4. Kayte Lawton

    Little to suggest that GDP growth will pick up in Q3 says my colleagueTony Dolphin http://t.co/dwBDypU #IPPR

  5. Bristol NUJ

    GDP figures confirm economy is stagnating: http://t.co/nuHPMuF writes @IPPR's Tony Dolphin

  6. Alex Braithwaite

    GDP figures confirm economy is stagnating: http://t.co/nuHPMuF writes @IPPR's Tony Dolphin

  7. Vicky Castle

    GDP figures confirm economy is stagnating: http://t.co/nuHPMuF writes @IPPR's Tony Dolphin

  8. Cormac Hollingsworth

    RT @leftfootfwd: GDP figures confirm economy is stagnating http://t.co/3ikF07Y – IoS -0.1% for June, nothing to do with the wedding that!

  9. Political Planet

    GDP figures confirm economy is stagnating: The second estimate of Q2 GDP growth released today confirms that the… http://t.co/XAeEfSC

  10. Shamik Das

    GDP figures confirm economy is stagnating: http://t.co/nuHPMuF writes @IPPR's Tony Dolphin

  11. matt jordan

    GDP figures confirm economy is stagnating: http://t.co/nuHPMuF writes @IPPR's Tony Dolphin

  12. Michael

    GDP figures confirm economy is stagnating l Left Foot Forward – http://j.mp/qq1izq

  13. Elaine S

    RT @TheRightArticle #GDP figures confirm #economy is stagnating l Left Foot Forward – http://t.co/SNFLAkM #osborne #politics #Tories

  14. Cable should concentrate on promoting growth not Goa | Left Foot Forward

    […] today’s depressing confirmation that Q2 growth was a measly 0.2%, officials at the Department for Business, Innovation and Skills (BIS) appear unfazed by the need […]

  15. London IWW

    GDP figures confirm economy is stagnating http://t.co/mTZDXez | #UKeconomy

  16. Leon Wolfson

    The MPC should do their job and resign. All of them. And nobody should step up for it. The government should be forced to take responsibility for their own trainwreck.

  17. Miss Browne

    GDP figures confirm economy is stagnating http://t.co/mTZDXez | #UKeconomy

  18. Government inaction on green economy is holding us back | Left Foot Forward

    […] the past few months, 0.2% second quarter growth, rising inflation and squeezed living standards have all underlined the need for urgent action to […]

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