The Tories bet the farm on chopping spending, as if that would somehow help trigger recovery. The current recovery is much too delicate for such harsh actions so it's more likely to force the economy backwards in the near term. The political debate continues over the issue of austerity though based on global economic history, there is no debate. At this point an "L" shaped recovery is the best case for the UK. The Independent:
"The recovery is likely to be characterised by a weak upward gradient, with a 'ratchet' effect and quarters of acceleration, deceleration and even decline," the IoD says.
The June survey of the service sector – comprising 70 per cent of the economy – by the Chartered institute of Purchasing and Supply (Cips) indicates that growth may have been stronger than expected in recent months, but future prospects may be dimmer than were previously hoped for.
Speculation about public spending cuts and the reality of the toughest Budget since the Second World War, delivered by the Chancellor on 22 June, has had a marked impact on consumer and business confidence.
The fall in the headline business activity index, from 55.4 to 54.4, was the third monthly drop since February's recent peak, leaving the balance at its lowest level since August. While still in positive territory – any reading above 50 indicates expansion – the trend is down. The Cips survey is regarded as a reliable leading indicator for the real economy, with about a six to nine-month lag.
