Britain’s economy contracted for the first time in seven years during the second quarter of 2019.
Output fell by 0.2 percent in the three months to June.
This was down from a 0.5 percent expansion in the first quarter according to data from the Office for National Statistics released last Friday.
A recession officially occurs when the economy contracts in two consecutive quarters. Millions of people on low wages and in appalling conditions will fear that, once again, they will be expected to pay when the bosses’ system hits trouble.
Chancellor Sajid Javid said, “I am not expecting a recession at all.” In the short-term he may be right.
Boris Johnson has promised tens of billions in tax cuts and spending increases that could give a temporary and sickly boost to growth.
And there are some special dynamics at work.
The rush to stockpile products in the run-up to the original Brexit deadline of 29 March boosted the economy.
But when an extension was granted, companies ran down their holdings. The economy is expected to expand again as companies again rush to stockpile ahead of the next Brexit deadline of 31 October.
Much of the commentary on the figures links the fall in the economy solely to such unusual factors and fear of a no-deal Brexit. But the more truthful ruling class supporters know it is more basic than that.
Fabrice Montagne, economist at Barclays bank, said, “Looking beyond the Brexit volatility we conclude that the underlying growth momentum is weaker than we previously thought.”
Britain’s economic problems are another symptom of a global slowdown. Figures from France, published on the same day as the British ones, pointed to an even sharper slowdown in industrial production during June. It echoes similar data from Germany out earlier in the week.
Rana Foroohar, an associate editor at the Financial Times newspaper, wrote this week, “As any number of indicators now show—from weak purchasing managers’ indices in the US, Spain, Italy, France and Germany, to rising corporate bankruptcies and a spike in US lay-offs—the global downturn has already begun.”
The article was illustrated with a logo proclaiming, “Summer of fear, coming soon.”
Foroohar continued, “Capital expenditure plans are being shelved. Existing home sales are dropping. And American consumers are cutting both credit card balances and their usage of motor fuel.”
Surging stock prices seem oblivious to such factors. But, says Foroohar, “At some point, the markets and the real economy must converge. I think that point is now.”
Central banks—the equivalent of the Bank of England—across the world are lowering their interest rates in an effort to support profit-making. If the cost of borrowing money falls, it is easier for struggling firms to cover their debts and stay afloat.
Last week the New Zealand central bank reduced its rate by twice as much as had been predicted.
Thailand’s central bank unexpectedly cut its base rate by 0.25 percentage points. India’s central bank dropped its rate by 0.35 percentage points, reducing it to the lowest level in nine years. The European Central Bank has indicated it may take measures that will hand billions more in credit to banks and companies next month.
The US Federal Reserve central bank is expected to make more cuts in its base rate following cuts last month.
Such methods were part of dealing with the crisis after the 2008-9 collapse. But rates are already so low that there is much less room for manoeuvre now than there was a decade ago.
None of this means that we are immediately on the verge of another disastrous recession. But any further economic reverses will come with mainstream politics in turmoil.
Racists, fascists and authoritarian governments are stronger in many parts of the world compared to when the last recession hit. Whatever the particular gyrations in the economy, it’s urgent for struggle to rise and for confident socialist politics to confront the capitalist failures.