The Construction Industry Is Leading the Way as the Economy Grows
The latest growth estimate (which may be revised later) shows the British economy growing by 0.8 percent in the second quarter. This was better than most “experts” had predicted, after recent retail sales and housing market data were weak. (Retail sales went down 0.2 percent in September.)
Growth during the Labour years came from booming retail sales (supplied by imports) and a house price bubble, so naturally if those things are now weak, the experts expected growth overall to be weak. They had assumed that the economy has not changed. And yet, the truth is that we do need to rebalance our economy, with more production, more exports, and less consumption.
These are just one set of figures – but they suggest that this just may be beginning to happen.
The BBC makes great play of the rise in construction output (which grew at 4 percent) and claims this is only because:
The building industry has been dealing with a backlog of work that had been postponed from the beginning of the year due to bad weather.
which conveniently overlooks the fact that if this is true, then the strong figures in the previous quarters were achieved in the face of a drag from that same poor weather.
There are other positive indications in that same BBC report that give some cautious grounds for optimism.
Manufacturing grew by 0.6 percent, and services also grew by 0.6 percent.
And the fall in retail sales also points to that much-needed rebalancing.
So the overall picture is output growth in construction, manufacturing and services, with retail sales and house prices both falling.
And those are all the things that we need to happen, if Britain’s economy is ever to be based on something more substantial than ever larger borrowing and artificial asset price bubbles.
These are early days – it’s probably a bit early for George Osborne’s triumphant description of the figures as “a vote of confidence in the new government’s economic policies”. But the figures are all good news. Gordon Brown’s artificial deficit-driven boom may be over, but it seems that a more soundly based growth may be taking root.