The interesting part of the article is as follows:
'Meanwhile, growth in consumer spending, which has been the engine for UK growth for most of the past decade, slowed appreciably - though the precise data on this will not be available until next month.'In writing this, they neatly sum up why economists were unable to predict the current slide into recession and depression. Once again, they are conflating consumer spending with economic growth, without actually considering where the consumer spending originates. In doing so, they are making the fundamental error of mistaking growth in debt with economic growth. This was one of the central themes of 'A Funny View of Wealth' and I still look on in wonder as I watch how mainstream economists continue to make this fundamental error in the face of the looming economic crisis.
At what point will they finally understand that measuring economic growth on the basis of consumer activity is a recipe for economic disaster?
The Telegraph goes on to say the following:
'Such a suspicion is confirmed by the ONS numbers, although there were a few surprises. Most notably, the services sector, which accounts for around three quarters of UK economic growth, expanded slightly faster than in the first quarter.The really curious part is that the author of this article 'sort of gets it', but just does not quite manage to grasp the central point. There is the recognition of the debt problem but no connection is made with the illusory growth that was created by the debt.
However, a closer look shows that this was largely thanks to a surge in transport and communication - perhaps in part due to higher petrol prices boosting profits.
The National Institute for Economic and Social Research said in its latest quarterly report that Britain faces three years of anaemic economic growth, though it will avoid a recession.
I happen to believe that it is too optimistic. With UK consumers and companies more indebted than any of their counterparts overseas the scale of the economic slowdown facing us will be significant.
Don't forget that only a few months ago a variety of economists (and the Council of Mortgage Lenders comes to mind here) were confidently predicting that house prices would not fall this year.
They could not have been more completely, utterly wrong. Economists find it hard to forecast recessions.'
I get the feeling that mainstream economists are finally on the cusp of discovery, and am now waiting patiently for the reality to sink in. At that point, no doubt, everyone will become wise with hindsight, and discover what readers of this blog have known for a long time:
Consumer spending does not mean economic growth.