WITH ten days to the US election, yesterday’s American growth figures could prove decisive in the knife-edge campaign. GDP grew at an annualised rate of 2 per cent in the third quarter of 2012, an improvement on the 1.3 per cent registered in the previous three months.
While that’s not in the 3 per cent range needed to make a major dent in unemployment, it is well above most forecasts. Not a knockout punch but perhaps just enough to help President Obama over the finishing line.
Three things are powering this autumn recovery. First, an upturn in consumer spending, with US shoppers buying everything from cars to new iPhones. Second, a significant upsurge in house construction. Housing starts are at a four-year high. Third, a timely increase in Federal government spending of nearly 10 per cent – all’s fair in love and politics.
But there remain underlying negatives that Mitt Romney can exploit. Business spending is down, reversing a trend. Companies are holding fire on investment till they see the outcome of the presidential race and the Congressional budget stand-off. Exports dropped 1.6 per cent, in contrast to an increase of 5.3 per cent in the previous quarter, reflecting a slowing global economy.
There is now a divide between the US and UK economies, which have both seen Q3 growth; and the eurozone and China, which are experiencing sharp deceleration. The global balance could tip either way in 2013.
But I fear a return of bond market jitters in Europe and a continuing inability of Congressional Republicans and Democrats to tackle the budget deficit.
Net loss for Scotland’s export companies
WE WON’T see figures for Scottish GDP growth in Q3 till the end of January. This unpardonable delay is annoying not just for commentators. How can the Scottish Government make policy with vital data appearing nearly half a year in arrears?
The only hard information this week on the Scottish economy was for Q2 manufacturing exports. While the value of export sales was up 1.7 per cent on the year, the final three months to June showed a contraction of 4 per cent, with sales of drink (ie whisky) down a worrying 5.8 per cent.
The real problem is not the short-term trend – quarterly results are notoriously volatile. Rather, the overall volume of Scottish exports is still 10 per cent down on its 2007 peak. Devolved or independent, there is no hope of sustained growth in an open economy like Scotland’s unless we do better. We export around 60 per cent of (non-oil) GDP to England and the rest of the world. Compare this with the export:GDP ratio for China (27 per cent), Japan (14 per cent) or Germany (37 per cent).
A recent survey by Lloyds Bank found that two-thirds of Scottish food and drink companies have no online retail presence. Only one in eight markets overseas using the internet. Haven’t they heard of Facebook?
