Yes there are all sorts of provisos.
The UK economy is still flatlining. A 0.1% expansion is about as close as you can get to zero.
Gross domestic product per head – a better measure of our living standards – is shrinking (indeed, it’s been shrinking for two quarters). And the UK remains far weaker than the leading G7 economy – the United States.
But even after taking all that into account, it’s hard not to conclude that the chancellor will be celebrating today’s GDP figures. After all, economists had expected the economy to shrink by 0.1%. Thanks to a late spurt in growth in December, it actually grew.
Moreover, up until today’s figures, the profile of economic growth in the UK was frankly pretty dismal. There was zero cumulative growth since last year’s election. Now, thanks to that jump in December – an unexpected late Christmas gift for the chancellor – cumulative growth since the election is now up to 0.4%.
Of course, none of this changes the bigger economic picture. The UK economy is still stuck in a rut. The enormous growth in migration in recent years means that, once you take into account the growing population, there is considerably less income floating around for every family than there was a few years ago.
And vast swathes of the UK economy are in desperate trouble. Most notably, the industrial sectors that used to power much of the country’s growth are contracting at a rapid rate. That is not just a UK problem – indeed, it’s shared with much of Europe. In Germany, the economy has contracted for two successive years. This deindustrialisation is one of the most significant issues facing the continent.
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And that’s before one considers a few other awkward issues: the real impact of last October’s budget have yet to be felt in the economy. The Office for Budget Responsibility is widely expected to slash its growth forecasts next month, which could prompt the chancellor to further trim spending in the coming years.
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Then there are other, even more profound challenges. What happens if and when the US imposes far-reaching tariffs on UK imports? How will the UK afford the dramatic increases in defence spending the White House is demanding? Now, more than ever before, it’s quite plausible that outside events could cause outsized impacts on the UK economy.
In short, while today’s numbers will be a relief in Downing Street, it’s not altogether clear how long that sense of relief will last.
