Friday, February 19, 2010

Fasten Your Seatbelts: Economy Facing Turbulence

Just when Labour thought they had pulled off a feather soft landing it appears that the UK economy is still up in the air and is still facing turbulence

A number of indicators are suggesting that the possibility of a double dip is even stronger that was initially feared. The oh, so small recovery in December, may end up being also oh, so short lived. So what are the figures that are causing concern.

  • A £4.3bn deficit in public sector borrowing - first time on record Treasury ahs not recorded a January surplus
  • 1.8 per cent drop in sales volume from December to January - three times worse than expectations worse month since June 2008.
  • Sale on household goods down 13.4% fastest drop since 1988
  • Fuel sales down 11.1% as a result of the poor weather.

Of course VAT going up in January may well have meant that the recovery in December was spurred by people buying stuff before the price went up. Looking at the household good which are often a January sale stalwart this may well have been the case. The possibility may have been that the recovery in December may only have been a blip ahead of the Governments own tax proposals taking effect. It might just be that the recovery hadn't really started, but people were making the most of the last month of 15% VAT, while this was still a stimulus.

If we were in an airplane no doubt the chief steward would come on the tannoy telling us to refasten our seatbelts as we will be experiencing turbulence ahead. Sixty of the wise passengers, who have a fair idea how to fly this plane have passed a note to the chief steward, a man called Darling, agreeing with his decision to delay Government spending cuts until 2011. The concern it that there may be a change of aircrew mid flight, that may not heed their memo and head straight into the storm.

The potential replacement crew's chief Steward, George Osborne, is saying that it is a lack of a logged flight plan to get us out of this mess that is losing the confidence of the passengers and indeed others who may be looking to invest in the airline. A former close follower of that band of sixty with more air hours than George when it comes to such decision, Vince Cable, has said that yes there needs to be a clear plan to deal with the deficit, but also considers that when to make to begin to make those cuts should be determined on the strength of the economy in a years time. Indeed he is itching to get on that tannoy to say:

"We've got to look at what is happening in the real economy and not be based on political dogma."

The replacement crew seem to have been on an easier that is sufficient simulator, to get ready to take over, and still seem to be blinkered by that rather than what is going on around them. Possibly spending too much time in first class and not enough checking what is going on in coach.

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