The ONS released preliminary estimates of GDP for the first quarter of 2009 and it wasn't pretty. Estimates from macroeconomic forecasters had suggested that GDP would fall 1.5%-1.6% in Q1 compared to the previous quarter. In fact, it was 1.9%. Within the GDP fall in the first quarter, construction fell 8.6% in 2009 Q1 compared to a year earlier and manufacturing fell 12.3% compared to a year earlier.
We won't get final figures till June but even if there are revisions, they are likely to be relatively slight and the extent of the falls is so great that it highlights the poor state of the economy and our industry particularly.
Looking back to the budget, and trawling through the full 260 page document, there are not many thoughts to add over and above those I made on this blog the day of the Chancellor's speech except that it was very disappointing overall.
The £175bn public borrowing this year was largely expected and even the £173bn was not much of a surprise. What was surprising was that the Chancellor's forecasts for growth appear far, far too optimistic (and the aforementioned IMF figures suggest that the Chancellor's forecasts for next year are actually in the wrong direction) and as a result, public borrowing is likely to be even worse than he suggests, increasing the likelihood and speed of significant spending cuts.
Moreover, away from the macroeconomy, there was relatively little to help the economy and certainly nothing in the way of imaginative thinking in a difficult situation. There are a lot of little moves that imply something is being done in many areas, but to relatively little effect with no changes that could potentially have made a big difference.
No reduction in VAT for energy saving goods (helping us move towards the budget's new 34% reduction in carbon emissions by 2020) and no VAT reductions on r&m work, for which the EU had changed regulations enabling member states to reduce VAT rates permanently on the labour element of r&m work.
£300 million to help the ailing Building Colleges for the Future programme is welcomed but is only 10% of what is currently needed. Likewise, £600 million to help housing is also welcome but is still just changing things at the margins.
The fall in housing has been unprecedented and we were anticipating the lowest housing starts since World War II in 2009 way back last summer (not that long ago but it certainly feels like it) and currently we are forecasting that housing starts in 2009 will fall to 70,000 compared to 181,000 just two years earlier.
We are just over a month away from getting 2009 Q1 figures on construction output by sector, a precursor to our next forecasts.
At this stage it is difficult to envisage any revision upwards but what may occur is a revision downwards in later years to take account of a sharper fall in public spending post-election given the anticipated state of public finances.
Given that we already have the sharpest fall in construction on record (and the records go back to 1955) for 2009, with only significant growth in 2012, sharper cuts in public spending look inevitable but could have a severe effect upon our industry if they occur before the private sector has recovered and could turn a deep recession into a deep depression....
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