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Terrible news for George Osborne: the economy shrank by 0.7 per cent in Q2

By Peter Hoskin
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Sadly, it is as expected: our economy shrank for three quarters running. Although we must apply the caveat that this morning's figure might be revised in future, the Office for National Statistics has the rate of economic growth between April and June this year at -0.7 per cent, well below even the most pessimistic of forecasts. It is, at least for now, the worst double-dip recession since quarterly records begain in 1955. Forget Andy Coulson and Rebekah Brooks's brush with the law — this is what will dominate the newspapers tomorrow.

But should we get overheated too? I made the point almost exactly a year ago (£) that these quarterly figures are something of a game. When they are negative, the government blames whatever external force it can (usually Europe, as Team Osborne is doing today), and the Opposition attacks with barely-contained glee — but, all the while, it goes unsaid that parts of the country have been in recession for decades. It's often as though the statistics are privileged above what's actually happening.

That said, if an economy can be treated as the sum of its parts, today's number does still hint at a widespread malaise; not least because it contains precipitous declines for the production and construction sectors (-1.3 and -5.2 per cent, respectively). And, for this reason, it is of enormous political significance. Coming off the back of his Budget, and its subsequent U-turns, George Osborne could have done without so rude a psychic shock. It will set the mood for the summer and beyond: the party conference and subsequent Autumn Statement will have to be about yet more tough choices.

And it will increase the ferocity of all those questions pecking at No.10: plans for growth, ministerial rehuffles, intra-Coalition relations. Of course Europe is a factor in Britain's malaise — as perhaps were the rain and the Jubilee, according to the ONS — but there is clearly room for more radical action. Almost everything that David Cameron does over the summer, politically speaking, should be about preparing the ground for it.


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