Even allowing for later statistical revisions – the preliminary estimate covers only about 40 per cent of the economy – the figure points to an economy in a frail and fragile state. Therefore it is vulnerable to both a likely retrenchment in consumer spending, after temporary stimulus measures have been withdrawn, and a slowdown or worse in the international economy.
The Prime Minister will argue that this vulnerability proves his point that government spending cannot be cut. But with only a modest improvement expected at best this year, will there be any occasion in the forseeable future when Labour would take action on the 178 billion budget deficit?
Now add to this the sapping effect of a long election campaign. Already there are concerns that business investment and expansion plans may be kept on ice pending clarity over government policy and the potential implications for interest rates and the currency. We now look set for a prolonged and bruising party political battle that could run for three months. Investors cannot commit with confidence during this period – a state of affairs that could lead to a creeping paralysis over the economy just when it requires impetus to drive recovery. How dispiriting that an upward statistical revision may be the economy's best hope.