This isn’t sluggish growth, it’s no growth

So the economy hasn’t really grown since the end of September. Forget the snow, forget Wills and Kate, park the tsunami. The underlying picture is not of sluggish growth. It’s no growth.

Alright there is a little bit, 0.2 per cent. At the end of September the size of the economy was 99.6 (on an index where 2006 = 100) and today it is barely above that, 99.8.

Some of the growth that should have happened over the past three months, will be delayed into Q3. The ONS says that might be 0.5%, but they aren’t sufficiently confident in that to advise us to assert that “underlying growth is 0.7%”.

They can’t really tell what the myriad of admittedly exceptional figures has actually done. Whatever the real figure for the distortion, the important thing is to remember to subtract it from the Q3 figure when it comes out in the Autumn.

What we can see is that it is not all bad news. Construction is now levelling off, up 0.5% after falling sharply earlier in the year. Business services and finance is growing strongly at 0.7%. manufacturing declined by 0.3%. Anyone fancy rebalancing the economy?

That manufacturing decline, was part of a sharp fall in the part of the economy known as “production”. Mining and quarrying in particular dragged the economy down. In this number there will be an impact from the Japanese tsunami. This is all detail. The big picture is that the economy is not growing.

This will have massive implications for politics. Combined with high inflation, it means that George Osborne’s borrowing numbers are going to go up, not down. If this economic stasis meets cooling economic sentiment from the Eurozone/US fiscal crises, then all bets are off. Could George Osborne end up borrowing this year, more than Alistair Darling had planned?

The real question should be: is this the new normal? Richard Koo, leading expert of Japan’s slump, predicted precisely this  happening to the UK to me in ’09. If he is right, and we are three years into what he calls “a balance sheet recession” the fiscal argument between Labour and the Conservatives is irrelevant compared with the change in the UK economy that we are enduring right now.