Figures for UK Gross Domestic Product (GDP) published last Wednesday, showed a 0.7% drop in GDP in the second quarter of 2012 after a fall of 0.3% in the first quarter, the latter which followed a 0.4% fall in the final quarter of 2011.
However, some commentators view this continuing technical recession as inconsistent with the strength of the latest job market figures, which showed that the number of persons employed increased by 181,000 during March-May, 2012. This is the strongest increase in employment in the last two years and comes mainly from the private sector. An additional quarter of a million people have been employed since autumn, 2011 while the economy according to the GDP figures has been technically in recession. At the same time the unemployment rate has decreased from 8.6% to 8.1%, which would indicate weak growth in an economy rather than one in recession. Otherwise, overall productivity has fallen which would then rather beg the question of employers as to why they have needed to recruit? This seems unlikely, particularly when historically such GDP figures have also always tended to be subsequently revised and, more often than not, upwards compared with the earlier estimates.
Therefore, the international rating agencies are currently still maintaining the AAA credit rating of the UK, with growth anticipated in the second half of 2012. Should such growth not materialise by the end of the year, however, the International Monetary Fund (IMF) has recommended that the government should consider a range of measures to boost economic growth, including slowing the rate of its deficit reduction programme.
Despite, therefore, Labour Opposition cries that Plan A of the Chancellor has manifestly failed and that now is the time for a new Plan B for Growth (not Austerity), it would appear that the Chancellor should maintain course with his Plan A.