Osborne is on track to rebalance the economy

It may look diminutive in between Easter and the Royal Wedding, but tomorrow is still a big day in the political calendar. It is, after all, the day when we hear the official growth estimate for the first quarter of this year. A negative number, and we shall have experienced two consecutive quarters of shrinkage — which is to say, the country will be back in recession. A positive number, and we shall have avoided that unhappy fate. So what are the forecasters saying? The consensus among bodies such as the NIESR and the CBI is around 0.5 percent, which – as Duncan Weldon explains in a very useful post – is barely enough to compensate for last quarter’s snow-induced hit, but is still some sort of growth. The Chancellor himself is said to have told Cabinet today that the economy is “on the right track.”

Of greater long-term significance than the headline growth figure, though, might be the shifting patterns that underlie it. A recent briefing from Citi had one of the most eye-catching graphs that I’ve seen recently. It compared various components of growth after the recessions of the mid-70s, the mid-80s, the mid-90s and 2008-09, like so:

The blue lines tell you almost everything you need to know. As Citi describes them:

“After the unbalanced boom of 2000-07 and deep recession, the overall recovery in GDP so far has been relatively modest. But, within that, the UK is now undergoing a three-sided rebalancing: from the public sector to the private sector; from consumption to investment; and from domestic demand to exports.”

In other words, the coalition is making some headway towards its stated goal of rebalancing an economy that had become too reliant on the state under Brown. And it is a forwards march that is typified by today’s encouraging figures from the manufacturing sector. Osborne may not be able to unravel the celebratory bunting just yet — particularly in the face of rising costs — but this rebalancing act may just be his biggest cause for cheer.