Guessing games

Well, if you hadn’t already guessed, the reason for David Cameron’s emphasis on growth at yesterday’s CBI speech was a sort of “if we can do it, then you can do it” clarion call to the private sector in advance of today’s news of a 0.8% rise in economic activity between July and September.

The increase follows a 1.2% jump in growth in the second quarter of the year which many analysts had labelled a blip. As the Beeb rather grudgingly mentions however, the latest GDP outcomes, which are double the 0.4% expected by analysts, may yet be revised downwards.

Government ministers will be today seizing on this data to dispel market fears of a double-dip recessionary trend. But they need not worry. A sanguine commodities sector and quite a few glass-half-full commentators will already know that these outcomes are the bow-wave effect of “unaffordable” public spending programmes chucked into the pot by an outgoing Labour government. The real pain is to come.

As one commentator observed, "The government will no doubt take this as a sign that the private sector can fill the gap created by public sector cuts, but with consumer confidence, hiring intentions surveys and housing activity data all softening we remain cautious."

Nevertheless, it was enough to boost the traditional indicators of economy buoyancy with the pound rising by a full cent against the dollar. This is just as well given that confidence in manufacturing & services sectors continues to drop as concerns grow over the impact of the spending cuts. Analysts also see poor sales figures for September, down 0.2%, as less reason for celebration.

The bets among the financial press are that Cameron will greet the news with something Churchillian. We assume they mean he will try to sell them insurance.