GDP figures suggest UK economy is slowly deflating

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It is clearly good news that a recession has been avoided but the big picture is that growth is pretty feeble.

The UK economy grew by 0.3% between July and September, after contracting by 0.2% in the second quarter of the year.

The economy is only 1% bigger than it was a year ago – the slowest annual rate of growth since 2010.

There’s more to life than GDP (gross domestic product, the monetary measure of the market value of all the final goods and services produced in a specific time period) of course, but goodness it helps.

Particularly if, like Labour and the Conservatives, you have made big election spending promises (in the case of Labour, enormous ones) that need funding.

Both parties are pledging billions of pounds of investment.

Chancellor Sajid Javid has focused on the positives from the latest GDP figures. Credit: ITV News
Weak growth won’t deliver the tax revenues to pay for it.

This morning, the Chancellor, Sajid Javid, tried to trumpet the positives.

It is true that there are a record number of people in work and pay is rising faster than prices, but real average pay (adjusted for inflation) is still lower than it was in 2008.

And business investment has been badly damaged by three years of uncertainty surrounding Brexit.

Micheal Saunders, a member of the Bank of England’s Monetary Policy Committee said recently that it is as if the economy has developed a “slow puncture”.

What happens next depends to a large extent on how, when and if, we leave the European Union.

Independent analysis of the various party’s Brexit plans by the National Institute of Economic and Social Research suggests the economic outlook would be brighter under a Liberal Democrat or a Labour government because they are more likely to keep the UK in the EU.

This may or may not be a problem for the Conservatives in the weeks ahead.