UK Q2 GDP at new risk of downward revision tomorrow

inspector_monkfish

09:44 27Aug09 Worse-Than-Expected UK Q2 Biz Investment

London, August 27.

UK business investment fell 10.4% in Q2. A much more modest fall of 3.6% was forecast. The poor number increases the risk of a downward revision to UK Q2 GDP at 08:30GMT tomorrow (second estimate). Minus 0.8% was the first estimate.

August"s CBI retail sales balance will be disclosed at 10:00GMT. An improvement to minus 13, from minus 15 in July, is forecast. US weekly jobless claims, and the second estimate of US Q2 GDP, will be revealed at 12:30GMT. GfK"s UK consumer confidence gauge will be revealed at midnight tonight (BST). Forecast: minus 23, from minus 25 in August.

themanbearpig

No worries, house prices are up. We can all just keep selling our houses to each other for more and more money, there is no need for a real economy.

lemonjelly

Will the adjustment be due to seasonal issues I wonder? I assume more brits are staying at home for holidays, and probably less foreign nationals are coming here for their holidays, but aren't "summer" months generally not too bad for the high street?

Or is it down to reduced disposable income due to paying off debt?

Or is it due to less people in work, less confidence etc?

inspector_monkfish

09:36 27Aug09 UK 2Q BUSINESS INVESTMENT FIRST EST -10.4% QQ; -18.4% YY

LONDON--Business investment in the U.K. fell 10.4% in the second quarter from the previous three months and dropped 18.4% on the year, the Office for National Statistics said in its preliminary estimate Thursday.

The quarterly decline was the largest since the second quarter of 1985,
according to the ONS. The annual decline was the largest since records started in 1967 the ONS said.

The preliminary data frequently sees major revisions.

The ONS said investment by manufacturers fell by 17.7% in the second quarter, and was down 18.4% on the second quarter of 2008.

inspector_monkfish

themanbearpig wrote: »

No worries, house prices are up. We can all just keep selling our houses to each other for more and more money, there is no need for a real economy.

thats all ok then
would u like another credit card sir? :eek:

Generali

Business investment is 10% of UK GDP???

If so that would represent a fall of an extra 0.7% in GDP assuming other components of GDP aren't revised upwards.

michaels

Why are we not 'feeling' this?

When the -0.8% came out the general consensus was for an upward revision. The rise in unemployment is slowing, retail sales are up yoy. It feels like the credit crunch is entirely hitting business investment (ties up with the money supply data Generali was quoting a couple of days ago) but surely if any one sector of the economy is hit there should be knock on effects and anyway for that sector to be hit so hard would seem to imply that demand (or forecast demand) had fallen off a cliff which just hasn't happened.

Some one explain it please.

Cannon_Fodder

1 million people newly unemployed are feeling this...

Generali

Cannon_Fodder wrote: »

1 million people newly unemployed are feeling this...

Different metric, innit.

Unemployment represents GDP perhaps 18 months ago.

Mr_Mumble

michaels, three reasons why folk may not be 'feeling' the downturn:


1. Government borrowing! The likely deficit of £200bn for 09/10 is around 16% of what GDP would have been without the stimulus/continued spending above our means. With 6-7 million working in the public sector and many millions more contracted by the government that's a lot of households who're being protected. That will change after the next election of course, whoever is in power!

2. Low interest rates (with QE becoming a factor in the future). Those benefiting: anyone with a tracker mortgage, anyone with good finances who is borrowing and the renters who, with a competitive rental market, get this benefit passed on to them.

3. Real disposable income has risen for pensioners (state pension went up 5%) and those with a job that doesn't pay less than a year ago (if RPI remains negative this will continue to boost anyone in work), again anyone working for the state. Add on the benefits from lower petrol, energy and raw material prices compared to a year-ago and many are feeling wealthier than ever.

On these specific numbers: British industry had benefited from a devalued currency. Output has fallen but the decline is not of the same magnitude as strong currency states such as Europe or Japan. These business investment numbers may partly reflect the increasing value of Sterling through Q2 as Britain becomes less competitive internationally investors are less likely to invest here.

Generali

Thanks Mr Mumble.

Investment (as I'm sure you know but some others may not) consists of investment in productive capacity, spending on new houses and changes to inventories.

Falls in the latter 2 parts of investment don't really matter in the end (within reason) as they can always be made up at a later date, to some extent at least although they cause pain via unemployment in the short term. Drops in spending on investment that will be used to create the GDP of tomorrow is more worrying.

DAK how to see what proportion of investment falls have come from which sort of investment? My feeling is that housing will be broadly the same as this time last year and I suspect that falling inventories must be pretty much finished as there's only so far they can fall but that's just a guess.

Anyone...?