Darling’s Fantasy Bubble Burst – Already 8

The government has just announced a first quarter fall of 1.9% in GDP.

It is important to understand this. That is not an annual rate of decline. It means that on 1 April 2009 the total economy meausred as GDP was 1.9% smaller than it was on 1 January 2009.

So for Darling’s budget projection of 3.5% decline this year to be true, the average decline over the next three quarters would have to be about 0.5%. Given that we are still on an accelerating decline (the -1.9% quarter follows a -1.6% quarter) that is plainly very very unlikely indeed.

My own Treasury source tells me that they had expected a – 1.5% decline in the first quarter as part of their -3.5% projection for the full year. The Treasury did not have the 1.9% figure from the National Statistical Office in advance of the budget.

So plainly Darling’s – 3.5% figure is wrong. It is worth noting that the IMF came out two days later with the same prediction as me, – 4.1%.


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8 thoughts on “Darling’s Fantasy Bubble Burst – Already

  • Grumpy Old Man

    I’ve got a horrible feeling you’re both undershooting, as Labour are probably still sitting on various embarrassing statistics. It’s actually a classic debtor’s ploy, ” I won’t declare this bit as I can probably handle it without anyone else knowing” A 5%+ decline is a distinct possibility.

  • ceedee

    It might only be 4.1% this year but I’ve still found nothing to suggest that the decline won’t continue into 2010.

    Where is the supposed up-swing to come from?

  • Craig


    It will


    I do not imagine the Treasury routinely falsifies predictions. Actually what your survey shows is that in times of economic growth there is little incentive to lie.

    The projections are noticeably worse in times of recession – and at the moment the incentive to lie is very strong. The government is determined to postpone the fiscal pain until after the election, so needs a rosier picture.

  • NeilHoskins

    Oddly, for somebody who is normally a quivering wreck of anxieties and neuroses, none of this really bothers me. I decided a long time ago that capitalism was rubbish and doomed to failure, and that there was a strong chance everything would go pear-shaped. But hang on a minute, back in the 1970s the economy was a small fraction of the size it is now, and we didn’t starve, there were affordable buses to use, and we had decent healthcare. Also, technology has moved on, making the cost of making stuff much lower (washing machines, cars, TVs). These are tiny, pathetic percentages we’re talking about here, when you compare them to the lifestyle changes that normal people have to make all the time, like when a child comes along or one partner has to give up work due to illness.

    Yes, one very real result of this mess is likely to be unemployment, but that’s happened to many of us before under Thatcher and we survived it. Yes, I’ll always blame Thatcher for wrecking my career, but I didn’t starve and still lead a reasonably happy life, despite not necessarily being in my dream job. I’m certainly not going to go out and top myself because I may have to wait an extra year or two for that 42″ plasma screen.

    I actually think there’s something immoral about treating the economy with such importance. Don’t forget that nulab were voted back in, even after the Iraq debacle, because they were deemed to be more able to handle the economy. It is the no.1 item in most voters’ minds. Disgusting.

  • Jon


    > it does appear that the Treasury is no more likely to

    > be wrong about the forecasts for 2011/2012

    > this year than any other

    This might appear to be true from the maths. However it doesn’t take into account other factors; as Craig says, the recession provides a good non-mathematical reason to falsify the stats. Aside from that, there is plenty of bad news swirling around New Labour at the moment, and they also have an election looming. “Good news” (real or manufactured) is required to offset quite a few dents to their miserable reputation.

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