Amid the cheering GDP, the current account deficit is puzzling

GDP has been revised up to 2.8% growth for 2014. George Osborne, the UK Chancellor, is merrily tweeting about how well the economy is currently going. And well he might, after the 2008/9 crisis and then the 2011 Euro crisis it is about time the UK had a little period of growth to help its people along.

However, at the same time as the good news, there is some bad news. This is that the current account deficit has maintained its all time high at 5.5% of GDP. In the recent past, say 1992, we have had economic crises put upon us by the poor state of our current account deficit.

To some extent, this has been ignored in more recent times because of low interest rates. These mean that we can service the excess debt we are accruing adequately. Indeed, with Quantitative Easing, we are printing excess money for ourselves and yet the Sterling exchange rate remains over-weight by international standards.

Perhaps we are a few years away from a crisis when rates rise and people start to question the wisdom of the UK overspending. Certainly if George Osborne has ended up creating a consumption boom then we will live to regret the current good times.

My hunch though is there is something more complex at work. The huge influx of immigrants to the UK and the ease with which they enter the Labour market has given the UK more opportunities for growth - especially when compared with neighbours such as France. As such, capital is flowing into the UK to invest (sadly, in London property mainly!) and the new population is sucking in imports of telly's and sofa's.

So it could be a really good sign that the Current Account Deficit is at all time highs as it signals we are the growth economy of Europe; or it could signal that we are on the precipice of a Sterling crisis once more. As ever with economics, you only get a hindsight view....

UK GDP not shock - 0.5% growth

Not great form for George Osborne to be front running the GDP numbers at Cabinet yesterday. Still the news is really as expected, with growth at 0.5% a decent start to the year.

The 'growth' spurt given by the pumping in of QE money and exorbitant Government spending is over and now we are left with the underlying private sector growth trying to outdo the very modest public sector contraction.

In real terms its rubbish because inflation is at 4% (UPDATE re comments, constant prices are compared to CPI not RPI, so the disparity is messing with the figures) so any growth this year under that is a decline in real terms on an RPI basis, on the plus side a low pound could re-value and alter the equation but ultra-low interest rates are not going to encourage that.

In the long-term, all is not so bad for macro-economic Britain, the deficit is being eaten into and the tax base will start to grow substantially and close the structural deficit as the Public Sector is shrunk over time.

Politically who would have thought that the Lib Dems hold the keys to the future of the UK a couple of years ago, if they fall apart and the Coalition fails then Labour will be back in and mess everything up again!