|This is hardly the moment to break out the bunting, but the news that GDP grew by 0.3 per cent in the first quarter of the year – according to provisional estimates – is a welcome shot in the arm for the Government ahead of next week’s local elections. Not only does it confirm that the economy has avoided a triple-dip recession, but it suggests that the cold winter and the eurozone’s continuing travails have not completely choked off the green shoots of recovery. The Office for National Statistics’ report also gives the lie to the argument that George Osborne’s austerity programme has inflicted savage damage on the economy – not least because its extent has been strictly limited. Government spending was in fact up both year-on-year and quarter-on-quarter.
Given the scale of the deficit, this situation is hardly ideal. Nor is it the only concern. Services have rebounded to pass their pre-crisis peak, but the economy as a whole has not. The promised rebalancing is nowhere in evidence: manufacturing and, in particular, construction are alarmingly weak. Britain’s trade deficit remains cavernous, due in large part to the slump in demand in Europe. While the economy may, as George Osborne said yesterday, be “healing”, it is still in the intensive care ward.
Of course, the true significance of the GDP data is not fiscal, but political. The Coalition can take heart from the flickering signs of recovery, but Labour finds itself almost praying for the economy to fail, since that is the only thing that can justify its insistence that Mr Osborne forsake austerity in order to spend and borrow more. We still wish that the Chancellor had been far bolder in his efforts to stimulate demand, and to unleash the forces of growth and enterprise. But he will doubtless be cheered that his opponents find themselves on even shakier ground.