The Office for National Statistics today revealed that economic growth in the UK was -0.2% in the last quarter of 2011 indicating that we may be heading back into recession – the dreaded double dip everyone had hoped we could avoid.
It is not surprising that hard pressed individuals have reined in their spending in the face of inflation, wage freezes, redundancies and so much uncertainty. At the same time public spending is also being reduced so in many ways it is more surprising that the figure is only 0.2%.
Mervyn King admits that as the economy rebalances “the path of recovery is likely to be arduous, long and uneven”. Debt still remains too high, both public and private.
But he struck an optimistic note “there is no reason to despair” things are moving in the right direction although he seemed to indicate rather slower than would be ideal.
The problems in the Eurozone are still creating significant obstacles to recovery. Greek default appears to be becoming ever more likely and little is being done to resolve the problems of other Euro members. The sooner something is agreed and implemented the quicker will be the recovery purely as a result of increased certainty and optimism.
Ultimately the best way to stimulate an economy is through cuts in taxation, putting more money in peoples pockets, but that will have to be saved for a future date as to do so now would only inflate the national debt still further.