It says something about the enfeebled state of the British economy when the Treasury can take comfort from a forecast from the Organisation for Economic Co-operation and Development that growth will be just 0.9% next year. Pitifully weak though that is for a country where output peaked almost five years ago, it is better than the 0.6% the Paris-based thinktank is expecting for Germany and the 0.3% it has pencilled in for France. In the beauty contest of the ugly, the UK comes out on top.
In reality, there was not much to celebrate in the OECD's half-yearly health check on its rich-country members and the City was also left unimpressed by confirmation that the UK expanded rapidly over the summer. The 1% growth in the third quarter was primarily due to special factors that will unwind in the final three months of the year, when national output is likely to decline once more.
Optimists could point to the small print of the GDP data as reason for small celebration. Trade gave a boost to growth in the quarter, as did business investment, up a chunky 3.7%. But the picture is less promising than it looks. For a start, the pickup in net exports included Olympic ticket sales to overseas visitors and masked a deteriorating trend that has seen the quarterly deficit in goods and services widen in 2012.
As analysis by Michael Saunders of Citigroup shows, the recent performance of investment has been even more worrying. Britain has the weakest investment rate of any G7 country, and the share of capital spending as a share of the economy fell from 14.1% to 13.9% in the third quarter, its lowest level since modern records began in 1955. Business investment at 8.1% of GDP was not quite a record low but, Saunders points out, well below its average of the past 20 years.
Little wonder then that Sir Mervyn King sounded so gloomy about the economy's prospects when giving testimony to MPs on Tuesday. The Bank of England thinks Britain is going nowhere fast and that rebalancing will take a long, long time. It is right on both counts.
