UK growth down as IMF warn deficit reduction should not be at the expense of growth

The UK economy barely grew in the second quarter of 2011, GDP rising just 0.1 per cent – down from its initial 0.2% estimate.

David-Cameron-George-Osborne-looking-grim The timing could not have been worse for the government, the depressing figures emerging in the run up to David Cameron’s speech to the Conservative party conference this afternoon, in which he will signal no change in the coalition line, insisting:

“Our plan is the right one and our plan will work.”

Responding to the grim news in the UK and the eurozone – Italy’s credit rating was cut by Moody’s overnight – the IMF said a stimulus was needed, that a eurozone solution is “overdue”, and warned governments against pursuing deficit reduction at the expense of growth.

The IMF say:

“The pursuit of nominal deficit targets should not come at the expense of risking a widespread contraction in economic activity… finding a durable solution to the euro area sovereign crisis has become more than overdue.”

On the UK economy, the headline figures (pdf) from the ONS show:

• UK gross domestic product (GDP) in volume terms increased by 0.1 per cent in the second quarter of 2011;

• Output of the production industries fell by 1.2 per cent, within which manufacturing rose by 0.2 per cent;

• Output of the service and construction industries increased by 0.2 per cent and 1.1 per cent respectively;

• Household final consumption expenditure decreased by 0.8 per cent in volume terms in the latest quarter;

• In current price terms, compensation of employees increased by 0.4 per cent in 2011 quarter two.

And to further dampen the mood, the IMF also warned a global recession in 2012 “can’t be ruled out”, citing the possibility “activity will turn downwards”.

See also:

• Barroso joins the international push for Plan B – Alex Hern, September 28th 2011

• Without growth will we even halve the deficit? – Cormac Hollingsworth, September 20th 2011

• IMF: Cutting the deficit too fast causes higher unemployment – Tony Dolphin, September 19th 2011

• New IMF boss joins calls for Plan B – Will Straw, August 16th 2011

• IMF backs Osborne – but warns of risks ahead – Tony Dolphin, June 6th 2011

http://twitter.com/theblondebmw/status/121526229068283904 Tracy Young

UK growth down as IMF warn deficit reduction should not be at the expense of growth: http://t.co/SJKaAX1T by @ShamikDas #CPC11
http://twitter.com/melissa_higgs/status/121528152005672960 Melissa Higgs

What was that IMF…? Debt reduction should not be at expense of growth? http://t.co/H4k1hrI9 by @ShamikDas #CPC11
http://twitter.com/jrfkathleen/status/121529720692150272 Kathleen Kelly

RT @leftfootfwd UK growth down: IMF warn deficit reduction should not be at the expense of growth: http://t.co/5iM9R7ZB by @ShamikDas #CPC11
http://twitter.com/therightarticle/status/121530137559834624 Michael

UK growth down as IMF warn deficit reduction should not be at the expense of growth l Shamik Das – http://j.mp/qMT9Vx
http://twitter.com/legalaware/status/121530227007553536 Legal Aware

UK growth down as IMF warn deficit reduction should not be at the expense of growth l Shamik Das – http://j.mp/qMT9Vx
http://twitter.com/samsoprano30/status/121530313800294400 Sam hussain

UK growth down as IMF warn deficit reduction should not be at the expense of growth l Shamik Das – http://j.mp/qMT9Vx
http://twitter.com/analiensaturn/status/121530465998995456 alien from saturn

UK growth down as IMF warn deficit reduction should not be at the expense of growth l Shamik Das – http://j.mp/qMT9Vx
http://twitter.com/vetofpsychicwar/status/121532727773241344 Panayotis Marneras

UK growth down as IMF warn deficit reduction should not be at the expense of growth l Shamik Das – http://j.mp/qMT9Vx
http://twitter.com/politicalplanet/status/121534725050478593 Political Planet

UK growth down as IMF warn deficit reduction should not be at the expense of growth: The UK economy barely grew … http://t.co/z1I5Yhac
http://twitter.com/maximmanchester/status/121535119029841920 Max

UK growth down as IMF warn deficit reduction should not be at the expense of growth l Shamik Das – http://j.mp/qMT9Vx
http://twitter.com/labour52rose/status/121550379220602881 Alex Braithwaite

RT @leftfootfwd: UK growth down as IMF warn deficit reduction should not be at the expense of growth http://t.co/EBOFcjdJ
http://twitter.com/bencooper86/status/121563739404247040 Ben Cooper

UK growth down as IMF warn deficit reduction should not be at the expense of growth http://t.co/ik3aZFz6 via @zite
http://www.regencychess.co.uk/ Julian

These figures come as no surprise. They have been attributed to low consumer spending. We have too many extremities in our economy that need to be adjusted in line with our current economic situation. VAT at 20% is hurting the economy badly. The high cost of fuel can also be blamed for hitting consumers where it hurts and hurting growth. Lowering both of these significantly would bring an instant boost to the real economy. One assumes that Osborne is holding off on things like this until it’s closer to election time, the problem being that our economy is laying on the floor bleeding to death now… and needs more urgent attention than he is giving.
http://twitter.com/alexhern/status/121588419276185600 Alex Hern

"The French and the German economies have slowed to a standstill"
Not just France and Germany, Dave…
http://t.co/vEeqmrVi
http://twitter.com/sr4longsight/status/121588839398649856 Suzanne Richards

er, Dave, its not just France and Germany whose economy has ground to a stand still http://t.co/ZdbdATtL #cpc11 #con11
http://www.Allthatsleft.co.uk Ray_North

What with Theresa May’s cat and David Cameron telling us to ‘pay off our credit cards’ this year the Tories have decided to dedicate their party conference not just to coming across as heartless, greedy bastards, but as profoundly stupid as well.
Follow the link to hear our resident economist explain how David Cameron’s economics is utterly mindless:

http://www.allthatsleft.co.uk/2011/10/conservative-conference-special-david-cameron-is-an-idiot/
http://twitter.com/neutralisation/status/121589059477966848 oh, darling.

er, Dave, its not just France and Germany whose economy has ground to a stand still http://t.co/ZdbdATtL #cpc11 #con11
http://www.leftfootforward.org/2011/10/george-osborne-speaking-truth-to-wealth-and-power-really/ Osborne: Speaking truth to wealth and power? Really? | Left Foot Forward

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Anon E Mouse

Ray_North – I’d have thought that the Labour Party would have had a better conference if it had been used to get a new leader.

All people like you are doing is giving the government an easy ride.

Think more Charles Clarke and John Reid and less Gordon Brown and Ed Balls and Labour may stop tanking in the polls….
http://twitter.com/hibiscuits1/status/121633204456263680 HEATHER WAKEFIELD

UK growth down as IMF warn deficit reduction should not be at the expense of growth | Left Foot Forward http://t.co/Tgmnd9CW via @addthis
http://www.leftfootforward.org/2011/10/david-cameron-conservative-party-conference-speech-manchester-2011/ Cameron’s central argument on debt is wrong; Labour needs to find a way to say so | Left Foot Forward

[...] was due to speak, the Office for National Statistics confirmed that, unfortunately, the economy is getting weaker. The Conservatives are increasingly vulnerable on the economy [...]
http://twitter.com/londoniww/status/123005416467726336 London IWW

UK growth down as IMF warn deficit reduction should not be at the expense of growth http://t.co/Vh1m2LUg | #UKeconomy
http://www.leftfootforward.org/2011/10/consumer-price-indices-september-2011-inflation-report/ Inflation report is bad news for Osborne’s targets | Left Foot Forward

[...] UK growth down as IMF warn deficit reduction should not be at the expense of growth – Shamik Das, October 5th [...]