UK Q4 GDP could come out even worse....

inspector_monkfish

This kind of got swallowed up in the original GDP thread. I think it is extremely important, and perhaps deserves a thread all of its own.........

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09:53 26Jan10 UK Q4 GDP could be even worse?

04:52 EST - The initial Q4 GDP estimate as bad as it was vs expectations (0.1%-0.9% range, 0.4% consensus) is roughly based on 50%-60% of the hard data to hand, with industrial production & trade (two key components) still to impact the next GDP update (Feb 26) which could tip the prelim Q4 fig in either direction - a potential nightmare for the govt if one or both are weak?

The UK Treasury has tried to put a measured gloss on the fact the UK exited recession with Darling perhaps the most vindicated. The Treasury statement said the govt is right to be confident (PM Brown was very upbeat last week on the likely growth story), but also right to be cautious on the recovery.

Looking at the breakdown, the relative 'weakness' for the below f/c 0.1% outcome looks on electricity, gas water that contributed a negative -3.3% q/q, -9.3% y/y. Incidentallly, ONS data again questions PMI surveys etc.

Generali

inspector_monkfish wrote: »

This kind of got swallowed up in the original GDP thread. I think it is extremely important, and perhaps deserves a thread all of its own.........

---

09:53 26Jan10 UK Q4 GDP could be even worse?

04:52 EST - The initial Q4 GDP estimate as bad as it was vs expectations (0.1%-0.9% range, 0.4% consensus) is roughly based on 50%-60% of the hard data to hand, with industrial production & trade (two key components) still to impact the next GDP update (Feb 26) which could tip the prelim Q4 fig in either direction - a potential nightmare for the govt if one or both are weak?

The UK Treasury has tried to put a measured gloss on the fact the UK exited recession with Darling perhaps the most vindicated. The Treasury statement said the govt is right to be confident (PM Brown was very upbeat last week on the likely growth story), but also right to be cautious on the recovery.

Looking at the breakdown, the relative 'weakness' for the below f/c 0.1% outcome looks on electricity, gas water that contributed a negative -3.3% q/q, -9.3% y/y. Incidentallly, ONS data again questions PMI surveys etc.

My guess is that consumer weakness is going to be the big positive for the GDP numbers once the dust settles (I haven't looked at the first estimate yet so I may be miles out here).

Consumer weakness + a weak pound => falling imports => higher GDP as GDP =

Consumption + Govt Spending + Investment + Exports - Imports

If you're feeling poor and don't buy as much Chinese tat and instead keep the money in your pocket, GDP rises.

Really2

Who knows?

Could go any way, the last two revisions have both been up.(that is not saying this one will be up, just that up is just as possible as down)

inspector_monkfish

Really2 wrote: »

Who knows?

Could go any way, the last two revisions have both been up.(that is not saying this one will be up, just that up is just as possible as down)

you sound like the grand old duke of york

tomterm8

I wonder what effect the inflation hike late in december will have on the GDP. As far as I know, these figures were produced with a 2% GDP deflator (that's what the BoE GDP deflator series seems to suggest http://www.hm-treasury.gov.uk/data_gdp_fig.htm). And yet, in december, inflation increased very rapidly to 2.9%. Revising up the deflator a half percent could easily wipe out all this growth.

StevieJ

Generali wrote: »

My guess is that consumer weakness is going to be the big positive for the GDP numbers once the dust settles (I haven't looked at the first estimate yet so I may be miles out here).

Consumer weakness + a weak pound => falling imports => higher GDP as GDP =

Consumption + Govt Spending + Investment + Exports - Imports

If you're feeling poor and don't buy as much Chinese tat and instead keep the money in your pocket, GDP rises.

The problem is Q4 includes Christmas and Christmas loves Tatsville :eek:

marklv

The really worrying thing is that inflation is increasing and growth is still practically non-existent. We could easily end up with a 'double dipper' stagflation-recession, which would be devastating. The standard of living would plummet for millions of people. There is a real possibility of a 1930s style depression.

inspector_monkfish

marklv wrote: »

The really worrying thing is that inflation is increasing and growth is still practically non-existent. We could easily end up with a 'double dipper' stagflation-recession, which would be devastating. The standard of living would plummet for millions of people. There is a real possibility of a 1930s style depression.

cheers.
but looking on the bright side, Costcutters are doing 2 for 1 on White Diamond 2ltr bottles

Really2

inspector_monkfish wrote: »

you sound like the grand old duke of york

As long as it not Edinburgh or I will sound like dervish.

DaddyBear

marklv wrote: »

The really worrying thing is that inflation is increasing and growth is still practically non-existent. We could easily end up with a 'double dipper' stagflation-recession, which would be devastating. The standard of living would plummet for millions of people. There is a real possibility of a 1930s style depression.

Get with the program. None of this matters as long as house prices, particularly those in Aberdeen, keep on rising.

lemonjelly

I think I kinda agree with generali.

0.1% leaves little margin for error, & if calculated on 50-60% of data, then we shouldn't start sucking each others !!!!s just yet...

My feeling, at least for the first 3-4 months of the year, as I've said on other threads is that:

I can't help but feel though that the scope for consumer spending isn't great.

To me, we'll see VAT get added back on. However my bigger concern is that essentials (food, energy bills - especially with the recent & forecast incoming cold spell), petrol (on guard really2!:)) & other essentials will start to take the majority of households income.

In addition, whilst unemployment hasn't rocketed, it seems that those who were out of work have moved into lower paid/part time work.

So there will be less to spend on "desireables".

I dunno. I'm not an out & out doom-mongerer, but I do feel that households are gonna be squeezed more. Especially if VAT rises further.

Plus pay increases aren't keeping up with inflation...

It is spring. However we've just had a lot of snow, a big freeze, & more cold weather is due. With another cold snap coming, green shoots right now might be a bit premature, as the frost could kill em off!:eek: