So, the Office for National Statistics in the UK proclaims that second quarter growth showed an increase of 0.6% – the best growth figures since mid 2010. Cue, the Conservative Party going off on holiday to the sunny uplands of Prosperity, a destination shortly available to all. Meanwhile, the Shadow Chancellor is heard mumbling into his beard that this is welcome but `long overdue`- and shuffles off to Skegness (Never heard of it ? Good, keep it that way.)
BUT, what does this growth figure actually mean to the wider population. The answer of course is, on its own, very little. With other closely scrutinised numbers such as unemployment stats, and inflation figures, at least there is a relevance to their daily lives but GDP ?? The breakdown of this figure is where the real interest lies. The services side of the economy performed reasonably well ( so some small vindication there for we filthy city types – but a long LONG way to go before you can even admit to even having known someone who once met a Banker !) but the parts of the economy where proper jobs come from ie. manufacturing and construction, are nowhere near the required levels.
Whilst I am on this point, and please bear with me – it concerns me that with increased globalisation, and manufacturing in the West being broadly shut down by the cheap labour available in the East, we are never going to find jobs for the large proportion of people who leave our schools (and some Universities !!) without a decent education. Gone are the days where the factories, fields, mills and mines gave an opportunity to earn a living wage. So where in the West, are we going to find opportunities for unskilled workers to wean them away from a State dependent culture ? Growing up in an area where your Parents have not got a job, and you have no prospect of getting one, breeds resentment and discontent. A huge problem for society.
Anyway, rant over, where was I….Ah yes, GDP, and its component parts. So, to summarise, the parts of GDP that have meaning over the life choices/possibilities of the electorate don`t look so promising. But, don`t forget that these numbers are only provisional – only about 40% of the data is actually in, hence the inevitable revisions to this number that will be announced over the next 6 months.
Even though the initial GDP statistic is unreliable, markets move based on it. In fact most of the closely anticipated numbers that come out of Governments are provisional and their only real purpose is to give the markets something (be it pretty unsubstantial) to hang on to. When you have a moment, just think of the fuss that there used to be about US non – farm payrolls – and then look at the subsequent revisions during the next couple of quarters. Had the real (eventual) number been known at the time, markets could have reacted totally differently. But as they say in the newspaper industry – never let the facts get in the way of a good story……