On Saturday I was nattering with a friend who works in the City. We were climbing a mountain in Scotland at the time. Did he think the UK would lose its AAA rating, and if so what difference would it make? Possibly, and probably not much, was the reply. The gilt markets are not as febrile as equities. While equity markets operate on sentiment and rumour, the state of a government's economy is plain from the published figures, and the gilt markets can see as well as the ratings agencies what's going on. The agencies, in other words, aren't telling us anything we don't already know. Sterling has not slumped on the news, or not yet.
If Moody's had had a little more patience I wonder what they might have made of the latest ONS figures, released yesterday. We have not yet had a triple dip recession, and the ONS now thinks we might well not have had a double dip one either. First estimates of GDP only use about 60% of the data, and as the other 40% comes in the view can change. While the first quarter of 2012 showed a fall in output, it was only 0.1%. The rise in the third quarter was a whole 1% (the Olympics) and only the last quarter showed a marked decline (at 0.3%).
Interestingly, if you strip out the effect of North Sea oil field closures for maintenance at the end of of 2011 and 2012, the economy did not double dip at all. And it turns out that the final quarter 2012 dip can be accounted for by the extra bank holiday.
Now of course there are ifs and buts, statistics and damned lies, but this appears to show that the onshore economy grew slightly in 2012, which might explain why unemployment, traditionally a lagging indicator, continues to fall.
In the Guardian this news featured only as an aside in the parliamentary sketch. It was entirely absent from the news and finance pages. The Torygraph splashed it, naturally.
George Osborne has lost face over the AAA withdrawal, but he will take some comfort from the ONS figures. If he can just get a little growth in the first quarter of 2013 and avoid talk of a triple dip, he may feel the worst is over for his Chancellorship.
On the other hand for the Tories, judging by the result of the Eastleigh by-election this morning, it looks as if the worst is yet to come.
