For Alistair Darling, spring has come early this year. After a long harsh and tempestuous winter for the financial markets his first budget makes light of the impact of the credit crunch as he predicts that growth will return to near normal levels after a brief down turn this year.
His revised forecast for this year of 1.75 to 2.25% looks likely to tend towards the lower level, potentially resulting in the lowest growth for over 15 years, as consumer spending slows.
But it is his expectation that growth will return in 2009 that worries me the most. As has been reported he has only just been able to keep within the target debt range of 40% of total income by raising £2.5bn of taxes. Unless his projections on growth are spot on, this levee will be breached.
It is my opinion that Darling has seriously underestimated the long-term outlook for the credit crunch. It seemed in his speech a mild inconvenience rather than the looming economic disaster that it is.
The US may very well already be in recession and our fortunes are very much dependent on the US’s. However, another iceberg is on the horizon as our own housing market stands on the brink of a downturn stemming growth and further impacting on consumer spending.
What does this mean for print? Well, print is inextricably tied to consumer spending and if that falls so too will print spend. Public sector cut backs will also impact on the number and value of tenders going to market.
Certainly there was some good news for SMEs in yesterday’s budget (see next week’s PrintWeek) but these will be wiped out if Darling’s gamble on the recovery of the economy sours. March is an early time for buds to grow and it may well be much longer than Darling has bet before they blossom.