The Double Dip warning goes mainstream
Having long warned that the Government’s economic agenda risked harming Britain’s recovery, I finally stuck my neck out in April and wrote that I now thought a double dip recession was more likely than not*.
I wrote that to avoid a recession four (nearly impossible) things have to happen in 2011:
1 – The impact of spending cuts on growth has to be a lot lower than the IMF estimate them to be.
2 – We have to experience very fast export growth (despite our major trading partner, the EU, being wracked by problems and austerity) and, at the same time, historically slow import growth.
3 – We need a mid/late 1990s style investment boom. Something that is not happening yet.
I was aware that this call was out of the consensus – but as I mentioned at the time, in June 2008 (when the last recession had actually started!), almost no mainstream commentators were predicting one.
Back in April the average forecast for 2011 growth was 1.7%, down from 2.0% in January. It has since fallen to 1.5% and looks to be revised down again. There is now a lot of talk that it could be under 1%. In other words the trend is towards forecasts coming down.
Last week we learned that industrial production is clearly double dipping already and that the hugely respected NIESR research is now forecasting growth of only 0.1% in the second quarter.
In 15 days time, on 26th July, we’ll find out one way or another exactly what the Q2 figure is – but even if it comes in positive the outlook for the economy is deeply troubling.
The ‘double dip’ view seems to be going mainstream.