UK GDP shrinks much more than expected in Q2

inspector_monkfish

10:01 24Jul09 UK TREASURY'S BYRNE - CAUTIOUS BUT CONFIDENT THAT UK GROWTH WILL RETURN TOWARDS END OF 2009

10:02 24Jul09 UK TREASURY MINISTER - Q2 GDP DATA SHOW SCALE OF GLOBAL DOWNTURN BUT ALSO PACE OF DECLINE EASING

10:11 24Jul09 UK still confident of late 2009 growth - minister

LONDON, July 24 - Britain's economy is still likely to return to growth later this year despite a further contraction in output in the second quarter of the year, junior finance minister Liam Byrne said on Friday.

"Today's figures are fresh evidence of the sheer scale of the global downturn we're fighting. But they also show the pace of slowdown is easing compared to the winter, which is why we remain cautious but confident that growth will return towards the end of the year," Byrne said in a statement.

The Office for National Statistics said earlier on Friday that Britain's economy shrank by 0.8 percent in the second quarter of 2009 after a 2.4 percent drop in first three months of the year -- far worse than most economists had expected.

Cannon_Fodder

Generali, or anyone else in the know;

If GDP = consumer consumption + investment + Government spending + exports - imports.

Does QE get counted, directly, somehow ? (in investment?)

Or is its influence hidden as, for example, increased investment doesn't know where the money has come from...?

michaels

1 I was wrong - I thought it would be positive.

2 At least I am not defaulting to blaming 'global' factors - it is like little kids who keep repeating the same lie again and again in the hope that someone will believe them if they say it often enough

inspector_monkfish wrote: »

... junior finance minister Liam Byrne said on Friday.

"Today's figures are fresh evidence of the sheer scale of the global downturn we're fighting."

CLAPTON

Cannon_Fodder wrote: »

Generali, or anyone else in the know;

If GDP = consumer consumption + investment + Government spending + exports - imports.

Does QE get counted, directly, somehow ? (in investment?)

Or is its influence hidden as, for example, increased investment doesn't know where the money has come from...?

QE affects the money supply that doesn't itself figure in the equation you quoted.
Obviously the availability of money may affect investment, consumer spending, government spending

Generali

http://www.statistics.gov.uk/cci/nugget.asp?id=192

Gross Domestic Product (GDP) decreased by 0.8 per cent in the second quarter of 2009, compared with a decrease of 2.4 per cent in the first quarter. The decline in output was due to decreases in all component aggregate series.

Construction output decreased by 2.2 per cent, compared with a decrease of 6.9 per cent in the previous quarter.

Total production output declined in the second quarter, decreasing by 0.7 per cent, compared with a fall of 5.1 per cent in the previous quarter. Electricity, gas and water made the largest contribution to the decline falling by 3.8 per cent, compared with a fall of 3.7 per cent in the previous quarter. Manufacturing output fell by 0.3 per cent compared with a decrease of 5.5 per cent in the first quarter. Mining and quarrying fell by 1.0 per cent compared with a decrease of 3.6 on the previous quarter.

Services output weakened by 0.6 per cent compared with a fall of 1.6 per cent in the previous quarter. Business services and finance contributed most to the decreased rate of decline.

Distribution, hotels and restaurants fell by 0.5 per cent, compared with a decrease of 1.5 per cent in the previous quarter. Wholesale and motor trades contributed most to the decline.

Transport, storage and communication fell by 2.1 per cent, compared with a fall of 3.0 per cent in the first quarter. Land transport and transport support made the largest contribution to the decrease.

Business services and finance decreased by 0.7 per cent, compared with a decrease of 2.5 per cent in the previous quarter. Computer Services made the largest contribution to the fall.

Government and other services output decreased by 0.2 per cent, compared with positive growth of 0.2 per cent in the previous quarter. Public administration and defence made the largest contribution to the decrease.

Agriculture, forestry and fishing output decreased by 2.3 per cent compared with a fall of 0.1 per cent in the previous quarter.

For the purposes of GDP calculations, 'transfer payments' (eg dole money, family beneft and state pensions) aren't included in Government spending. All that extra borrowing is being used to pay dole money to people.

I hope your kids like the way their taxes are being spent.

Conrad

Graham_Devon wrote: »

the reality, which I have always banged on and on about, is somewhat different.

reality - you well know that on one day there is gloom, on the next we get those unexpected rise in consumer spending / manufacturing inventory surprise reduction stories.

Mental filtering is no good for ya, take in ALL inputs

Graham_Devon

Conrad wrote: »

reality - you well know that on one day there is gloom, on the next we get those unexpected rise in consumer spending / manufacturing inventory surprise reduction stories.

Mental filtering is no good for ya, take in ALL inputs

This is not mental filtering. These figures show reality.

No matter how many optimism stories we have had over the last quarter. Reality shows a bigger decline than anyone expected.

mbga9pgf

To be fair, I have be battering on about a 6% fall in GDP as a minimum for a while.

adrian_bond

I think we should sell britain to china. lol. discuss that one!

tomterm8

CLAPTON wrote: »

QE affects the money supply that doesn't itself figure in the equation you quoted.
Obviously the availability of money may affect investment, consumer spending, government spending

Most of the GDP figures that are announced are real terms, i.e. the GDP is adjusted by the GDP deflator which is a measurement of prices. So, on a theoretical basis, if we are not in a liquidity trap (i.e. if changes in the quantity of money affect the aggregate price level) QE should not affect the GDP.

If we are in a liquidity trap, I would assume that QE would increase the GDP, although I'm not sophisticated enough to do the maths;)