MSE News: UK economy still in recession

tomterm8

Generali wrote: »

It's funny, any other country in the world would be celebrating the rise of a suburban nobody to the highest elected office in the land. In Britain, the newspapers sneered at his wife for good housekeeping (keeping old bits of cheese to use in cooking) and at him for being a 'failed bus conductor'.

Am I the only one who likes dull leaders? Major was a bit like Henry VII... very boring, good with money, and peaceful. Whereas blair is a Henry VIII, an exciting leader that got us into two expensive wars we couldn't win, bankrupted the country, and nicked bazillions of pounds from our pension pot.

kabayiri

The timing of Blair's step down from power is quite possibly the best (or luckiest) in history.

He is also earning more money than any other ex-PM ever has. Love him or hate him, the man has the midas touch.

ManAtHome

We've dropped to the relegation spot in the G7...

But most embarrassing of all will be the news that as a result the UK has now fallen beneath Italy for the first time since the mid-1990s to become the world’s seventh biggest economy

Full story http://www.telegraph.co.uk/finance/financetopics/recession/6418344/UK-economy-overtaken-by-Italy.html

Tomorrow's press release:
"We have ensured the UK populace can all feel safer now Mr Berlusconi is no longer behind us"

setmefree2

Yesterday's contribution from Ms Flanders blog

What should matter most is what's happening to our own economy, not how we're doing compared to everyone else.
But that's not the way human nature works. As Gore Vidal once said: "it's not enough to succeed. Others must fail." And right now it's the UK that seems to be failing.
As commentators were quick to note this morning when the latest GDP figures came out, a sixth consecutive quarter of economic decline means that the UK is still in recession, while Germany, France and Japan are all now recovering.
Their economies all grew between April and June. They will probably have grown in the third quarter as well, and we're expecting the US to come out of recovery when we get their third quarter figures next week.
So, what's the problem? Chancellor Alistair Darling suggested in an interview for the BBC today that the likes of Germany and Japan had much sharper losses in output at the start, which would lead you to expect a sharper rebound.
It is true that the comparison between Britain and other countries looks a bit better when you compare the total decline in national income from peak to trough (or from the start of the recession until the end).
On that basis, Germany lost 6.7% of national income over the course of its recession. And many German economists don't think their country is out of the woods: they think another quarter or two of negative growth is quite possible.
Assuming the UK comes out of recession in the last three months of the year - and we're learning not to assume anything - then the overall loss of output for the UK would be somewhat lower, at 5.9%. The total decline for Japan has been a whopping 8.4%.
It is France and the US that come out best. The peak-to-trough decline for France will have been 3.5%. Assuming the US has now come out of recession, its loss in income will have been 3.7%. (Thanks to Chris Apostolou at Fathom Consulting for pulling the numbers together for me).
The latest consensus forecasts are for growth of 1.3% in 2010 in the UK, similar to the government's own forecast. The prediction for Germany is 1.4%, and for France it's 1.2%. The US is expected to grow by 2.6% - but that, too, is a good deal lower than you would usually expect coming out of a steep recession.
Looking ahead, the similarities are greater than the differences. The road to recovery is expected to be fairly slow in all the major advanced economies, the UK included.
When you ask economists to explain why Britain is lagging behind, they can provide any number of reasons - particularly our greater reliance on the financial sector compared to our neighbours.
That prior dependence on the City, along with the poor state of the public finances and our long-term need to increase saving, could well lead us to enjoy slower growth than other economies in the next few years. But right now, we shouldn't fret too much about "falling behind".
It may not be comfortable for the government, but the truth is it's better for our economy to have other markets recover than for all of us to remain in recession.
After all, the cheap pound can't help British exports - or a long-term re-balancing of our economy - if there's no-one out there who wants to buy.
Growth in the rest of the world may rankle. But our own recovery won't get far without it.
PS Sorry a data mix-up resulted in earlier figures being different.

Linky

wigglebeena

tomterm8 wrote: »

Am I the only one who likes dull leaders? Major was a bit like Henry VII... very boring, good with money, and peaceful. Whereas blair is a Henry VIII, an exciting leader that got us into two expensive wars we couldn't win, bankrupted the country, and nicked bazillions of pounds from our pension pot.

'Exciting'? You lost me there. Unless you've got a thesaurus where it translates to '****ing scumbag'.

doire_2

Oh dear and for weeks we have had bulls on here saying things were on the up:rolleyes:

Spiv_2

Link to Economist Article

Britain's economy Still Falling

Earlier this year Britain, rather surprisingly, seemed to be suffering less in the downturn than some other big countries. Germany and Japan had taken a hammering when world trade plummeted after the near-death experience of Western banking systems late in 2008. Their economies were hit especially hard because they specialise in producing investment goods and cars, demand for which had evaporated. Now their prospects are brightening as the inventory cycle turns and global trade starts to recover.
By contrast, the continuing slump in Britain reflects the vulnerability of an economy especially laden with debt and with a particularly troubled banking sector. Britain's households are the most over-borrowed in the G7. Its banks have been among the worst affected in the financial crisis as a result of unsound financing practices (a heavy reliance on fickle wholesale funding rather than steadier retail deposits) and insufficient capital to support over-extended lending.

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=478046&story_id=14732042

dopester

ManAtHome wrote: »

We've dropped to the relegation spot in the G7...

But most embarrassing of all will be the news that as a result the UK has now fallen beneath Italy for the first time since the mid-1990s to become the world’s seventh biggest economy

Full story http://www.telegraph.co.uk/finance/financetopics/recession/6418344/UK-economy-overtaken-by-Italy.html

Tomorrow's press release:
"We have ensured the UK populace can all feel safer now Mr Berlusconi is no longer behind us"

It isn't that embarrassing. Italy isn't such a backwards economy. Or at least the Italians are much less focussed about worshipping ever more expensive homes and credit expansion-debt fuelled consumption alone - although may be quite reliant on consuming countries buying their stuff + tourism ect.

Bill Bryson's travel book 'Neither Here Nor There' I read in '94 (the first edition published in '91)

"At the time of my visit, the Italians were working their way through their forty-eighth government in forty-five years.

The country has the social structure of a banana republic, yet the amazing thing is that it thrives. It is now the fifth-biggest economy in the world, which is a simply staggering achievement in the face of such chronic disorder.

If they had the work ethic of the Japanese they would be masters of the planet. Thank goodness they don't. They are too busy expending their considerable energies on the pleasurable minutiae of daily life -- children, good food, arguing in cafes -- which is just how it should be."

From pg 125 of Neither Here Nor There: Travels In Europe, by Bill Bryson; copyrighted 1991 to the author, Minerva Paperbacks, London.

Spiv_2

Britain's economy is still dangerously fragile

The political implications of these latest figures are significant. The Chancellor, Alistair Darling, claimed not to be surprised by the figures yesterday. But both he and the Prime Minister, Gordon Brown, have staked their party's fortunes on the emergence of clear signs of recovery by the election next year. There is likely to be some growth by then; whether it will be as encouraging as Labour hopes is doubtful.
Yet these GDP figures are not especially good news for the Conservatives either. David Cameron and George Osborne have spent recent months calling for drastic action to reduce the budget deficit, which they identified at their party conference this month as the "clear and present danger to the British economy". The deep economic weakness revealed in these latest figures makes such priorities look misplaced. The Conservatives plainly did not anticipate the slump being this severe, casting doubt on the Opposition's economic credibility.
Of course, the Conservatives were not alone in misreading the nature of this crisis. It should now be clear that this is not a "normal" recession; the sort induced by governments as they raise interest rates in an attempt to crush inflation. Rather, it is a result of a banking meltdown. Downturns after such credit crises tend to be more painful and much more prolonged. That explains why Britain – which has relied heavily on credit to finance growth – is suffering particularly acutely.

http://www.independent.co.uk/opinion/leading-articles/leading-article-britains-economy-is-still-dangerously-fragile-1808424.html

worldtraveller

"The political implications of these latest figures are significant. The Chancellor, "Alistair Darling, claimed not to be surprised by the figures yesterday. But both he and the Prime Minister, Gordon Brown, have staked their party's fortunes on the emergence of clear signs of recovery by the election next year. There is likely to be some growth by then; whether it will be as encouraging as Labour hopes is doubtful."

My personal opinion all along has been that we will indeed be out of recession in Q4, quite simply due, in a major part, to re-stocking inventory that was depleted earlier in the year. In this regard I believe that Brown & Darling will be proved largely correct. The big issue though, is what will happen thereafter and, IMO, we are looking at bumping around in an L-shaped recovery, or, possibly a W-shaped situation. My fear is not so much for next year though, it's significantly higher for 2011, when we will be faced with inevitable tax rises, continuing rises in unemployment (IMO easily above 3 million), interest rate hikes and significant further falls in house values, which could bring the country to it's knees by stiffling any small improvement we may see in 2010. Unfortunately, at that time, the Government cupboard, as it is now, will be bare.