GDP 1.1% up - good sign but let's not read too much into it

So the figures are now out for growth in Q2 2010 and it is looking like it is almost double what was predicted by economists. They thought it would be 0.6% and it is actually 1.1%

Predictably both Labour and the government are trying to claim that the better than expected figures vindicate their policies. Alistair Darling claims that they prove the previous government's "measured and balanced" approach is working. Meanwhile George Osborne claims that they show the current government's plan to cut the public sector is the right approach (only 0.1% of the growth came from the public sector, the remaining 1% is from the private sector).

I think it is too early to say what these figures show with any certainty. Also, they cover April, May and June which is almost perfectly bisected by the two administrations. April and the first half of May had Labour at the helm whilst for the second half of May and June the coalition was in place. But the idea that the decisions taken by the coalition in recent weeks would already have percolated through to the growth figures is I think a little far-fetched. If anything I would say Labour have the stronger claim as it is their policies in the last year or two that will still be having their effect. But even then, there was a strong expectation that Labour would not be in power after May and so market sentiment for what it thought would happen may also need to be priced in.

So I don't think either side should get carried away and make overblown claims at this stage. not least because these are only preliminary figures which could end up revised down in a few weeks time.

I would suggest that the growth figures in the next few quarters will be more instructive as to whether we are on the right track now rather than what we have seen today.