What happened to our Private-Sector led recovery?

When he presented his ‘Emergency Budget,’ George Osborne not only provided us with growth forecasts that have been down-graded more times than I can remember; he also told us that this would be a private-sector led recovery – so how does this stack up against the figures for Quarter 3?

The headline is obviously that growth has been confirmed at 0.5%, so that’s good at least, a bit of growth.  However, behind the headline is information about how the growth was generated and this is is where things get a bit more worrying.

GDP is made up of a number of elements, the largest of which is Household Consumption which accounted for 61% of the total in 2010.  In Quarter 3 of 2011, this figure was unchanged.  This is pretty woeful, but is at least the first time under the Coalition that Household Consumption has not gone down (the last time was Q2 2010).

Another big component of GDP is imports and exports.  Given that our currency has been devalued by successive stimuli, we should expect strong export figures.  Sadly this isn’t the case; exports are down 1% whereas imports are up 0.3%.  For some comparison, this compares to an increase in exports of 0.2% in Q3 2010 and a whopping 3.9% in Q4.

Representing 15% of 2010’s GDP was Gross Fixed Capital Formation, or GFCF, which measures investment in buildings and machinery.  Bad news again I’m afraid, as this fell by 0.2% on the last quarter and was 1.8% lower than a year ago.

Finally, 23% of the GDP figure is made up of Government Consumption.  This actually increased by 0.9%.  Now I’m no economist, but this doesn’t look good to me.

As the only large element of GDP to grow, against flat-lining and falls in other areas, it seems that the only reason that we grew at all was because of an increase in Government Consumption.

So much for your private sector recovery George.

Ben Powell is a Labour Councillor on Cheshire West and Chester Council and Shadow Executive Member for Prosperity and Regeneration.