Monday, 9 August 2010

Vince scratches his head.....

Vince Cable at the Department for Business must be a puzzled man this morning. Manufacturing is booming (relatively), but it is not yet delivering the export-led recovery that the Treasury is relying on to get us out of trouble.

I posted this on June 24th, questioning the ConDem Government's reliance on a predicted export boom to drag us out of the recession. It includes a link to a Newsnight piece by Paul Mason showing Treasury models predicting an export boom. Of course, if there is not an incease in exports, then the economy will not improve as much as predicted and a "double dip" recession, or a very slow recovery becomes inevitable, with dire results for Treasury income and the recovery plan, not to mention jobs and incomes.

There's a fascinating piece in today's Guardian by Phillip Inman, puzzling over why the relative success of manufacturing during the recession has not resulted in increased exports.
"Last month, manufacturers were especially gloomy about export orders. The purchasing managers index (PMI), an important monthly snapshot of manufacturing activity, collapsed to an 11-month low of 50.8. Manufacturers found buyers at home for their goods, but attempts to sell abroad failed to gain traction"
George Osborne based his confidence on an export led recovery on the performance of Canada in recovering from a recession in the '90s. The Canadians concentrated on boosting exports and their economy grew quickly.

But at the time Canada's biggest export market, the USA, was in the middle of a boom, and capable of absorbing its neighbours manufacturing exports. As we speak, the European economy languishes and the US economy trembles on the brink of a double dip. UK manufacturing can be as healthy as it wants, but if our main markets are not growing, it is difficult to see where an export boom is coming from.

No wonder Vince scratches his head....


  1. It seems to me you've answered the question yourself (maybe you should phone Vince).

    The home market is stagnant as people wait for the promised redundancies. People who, till now, were always secure in their jobs, are waiting to hear if theirs will be the post to go ... The western world is teetering on the brink of another recession. And British goods don’t have a huge reputation. If you want cheap buy Chinese or Indian; if you want good buy German or Japanese.

    It’s sad but it’s true. Mr Osborne has probably been a little over optimistic

  2. Not sure if it is optimism or sheer bloody-mindedness.....

    Anyway, the export thing is foreshadowed in today's trade figures which show that exports are indeed up, but imports are up almost as much.

    For Osborne's tactics to work exports would have to grow much faster than imports to produce economic growth on the necessary scale.....