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Healing but no miracle cure for the economy

The latest revisions to GDP data show that the hoped for broadening of growth isn’t as good as the Chancellor might have hoped. Photo: Press Association

George Osborne is likely to take to the stage next week at the Conservative party conference talking about the economy "healing".

It’s become his favourite word, sounding caring and optimistic whilst still allowing for the odd relapse in the patient’s recovery.

But what risk of an embarrassing relapse? Most economists are forecasting a relatively consistent, if modest, improvement this year and next, but today we got some detail which shows it’s too soon to celebrate.

The latest revisions to GDP data - a continuous refining of the official picture of how the economy has fared - show that the hoped for broadening of growth isn’t as good as the Chancellor might have hoped.

For all the talk of an "export-led recovery" net trade was essentially flat: growth in exports was almost exactly matched by growth in imports.

Chancellor George Osborne is likely to talk about economic 'healing' at the Conservative Party conference. Credit: Stefan Rousseau/PA Wire

Worryingly, business investment in the second three months of this year was revised down from 8.1% growth to a contraction of 2.7%, showing a real hesitation amongst businesses to spend on the training and equipment needed to boost productivity.

So there are signs of weakness still, but Mr Osborne may highlight that all parts of the output side of the economy are now growing: not just the huge service sector but also better performances in production, agriculture and construction.

The wider problems which have held back the recovery in recent years haven’t gone away altogether: there’s much more austerity to come, our main customers in the eurozone are only just beginning to emerge from recession and cash is tight - both for consumers as wages continue to trail behind price rises and for companies which still find it hard to get hold of credit.

Healing maybe, but send the Chancellor a bunch of grapes.