Comment: Pressure growing on Cameron and Osborne

By MARTIN FLANAGAN
Published on 26/07/2012 00:00

IT IS difficult to put any sort of positive slant on Britain’s latest GDP data. So we won’t. The numbers were appalling. The economy continued to be battered by the backwash of the chronic eurozone financial crisis and weak UK consumer demand in the second quarter of 2012. These long-term difficulties were then compounded by negative one-offs such as the extra Jubilee holiday and the unprecedented three months of rainy weather from April, including the wettest June since 1766.

The Office for National Statistics revealed that Britain’s economy shrank by a whopping 0.7 per cent in the latest quarter. That was much worse than the 0.3 per cent consensus expectation of City economists.

Depressing data is quite often positively revised farther down the road, leaving a slightly better picture. But, even if the fall was reduced to 0.6 per cent or 0.5 per cent, it still suggests a wheezing and stuttering economy.

It will make worrying reading for David Cameron and his Chancellor, George Osborne. And it will give power to the elbow of the Tories’ partners in government, the Lib-Dems, who one suspects want much greater stimulus for the economy from Whitehall.

Up until now Cameron has staked all the chips on black with the government’s austerity programme, with Treasury and Bank of England business initiatives such as “Funding for Lending” and quantitative easing providing some covering relief.

But the latest dire figures, showing the economic patient is still in intensive care nearly three years after the 2008-9 recession, may be seen in retrospect as a tipping point in the debate about whether we are pursuing the right non-expansionary policy.

Clamour will grow for a greater government-led boost for the economy, and the accumulation of depressing data on the ground, from services to manufacturing and construction, show that critics of the one-club austerity gameplan surely cannot be dismissed as Jeremiahs who simply can’t hold their nerve.

Those critics could justifiably respond that the economy seems rudderless with no shoreline in view, and not to point it out is a dereliction of duty.

There has been a lack of growth in the first half of this year, and it is far from clear this will be reversed in the second half.

The CBI employers group’s contention yesterday that its members are seeing a flat rather than declining economy frankly looks like whistling in the dark. Particularly when the CBI’s own latest Scottish industrial trends survey shows declining optimism about business prospects and exports.

Things were looking bleak for a British recovery anyway. They look much more cheerless now.

Shiny Apple fails to appeal to Wall Street

SHINy technology monolith Apple has been a stunningly successful, cutting-edge electronics game-changer. It has also propelled the US giant to become the most valuable publicly quoted stock.

So it is a bit of a shock to see Apple miss Wall Street forecasts with its latest quarterly revenues. Apparently this was partly due to customers holding out for the new iPhone to be launched in the autumn.

That has triggered some fears that the group will become a victim of its own success, firstly facing the challenge of continually having to improve its products; secondly seeing growth rates fall as customers await the latest improved gizmo; and finally seeing sales of the latest i-product on the block eating into sales of earlier versions.

The markets should get a grip. Apple is no Facebook, with a relatively untried business model. Its record of innovation is virtually peerless, even if now being pushed hard by Samsung.

And there is no particular reason why it should not be able to perform the virtuous circle of charging higher prices for ever‑whizzier electronic versions of iPhones, iPads etc, while building up a mature, cheaper market for earlier versions.

Apple boosted the number of iPhones it sold in Q3 by a 28 per cent. And a rumoured smaller iPad later this year – and possibly even a new TV – could easily see it resume its exponential growth. Even when that runaway phase inevitably fades, there is every reason for Apple to benefit for a long time from a loyal customer franchise second to none.