UK to face bigger downturn

Graham_Devon

The UK economy is to contract by more than previously thought, according to a leading forecaster.

Economists at Standard Chartered bank said the economy will contract by 1.3% in 2012, having previously predicted growth of 0.6% for next year.

The eurozone economy will perform even more badly, the bank forecast, contracting by 1.5%.

The Office for Budget Responsibility has said it expects the UK economy to grow by 0.9% in 2012.

And a survey of economic forecasts in November, carried out by the Treasury, suggested growth of between -0.4% and 2.3%.

However Standard Chartered said that "the mounting crisis" in advanced economies, especially the eurozone, has forced it to revise down its own forecasts.

"We think there will be a triple shock to the European economy," said Standard Chartered economist Thomas Costerg.

"[The] first being a confidence crisis, consumers spend less, businesses invest less. The second is that banks are tightening credit owing to the credit squeeze and the third is national governments tightening budgets all over Europe," he explained.

These shocks will cause a recession, not just in the eurozone but also in the UK, he explained.

http://www.bbc.co.uk/news/business-16136558

Who will be closer to the truth?!

Economists....Office for Budget Responsibility....or Standard Chartered Bank?

Mallotum_X

Which version of the truth will we be testing them against?

If its the official govt figures then i think the Office for Budget Responsibility will win. The figs will be kept just positive.

MacMickster

To tie this thread in with the "How would you get the UK economy moving again" thread, it has been stated on there that inflation is not growth. Now I would accept that general statement and, in the medium to long term, high inflation rates undoubtedly have a negative impact on growth (although there is plenty of academic debate about what rate of inflation is desirable).

What about the short-term however? More specifically this calendar year. GDP is the measure of the value of the UK's output in goods and services, and we have had a very small amount of growth in GDP over the last 12 months. Given that inflation has been roughly 5% (dependant on the measure that is used) have we actually had a real-terms contraction of the economy?

Surely real growth should be growth over and above inflation - or am I having one of my dense days?

Mr_Mumble

MacMickster, quoted GDP figures have a GDP 'deflator' applied so they do take inflation into account. However, note that the GDP deflator is usually a different measure than CPI or RPI.

Wookster

Well, the OBR forecast is predicated on significantly more borrowing and a swift resolution to the euro crisis.

I'd like to see what the numbers for consumer & corporate borrowing are in the last 4 years but given the deleveraging going on, struggle to see how borrowing will increase.

MacMickster

Mr_Mumble wrote: »

MacMickster, quoted GDP figures have a GDP 'deflator' applied so they do take inflation into account. However, note that the GDP deflator is usually a different measure than CPI or RPI.

Thanks for that Mr Mumble. I did actually know that, but seem to be suffering from brain fog today.

wymondham

Wookster wrote: »

Well, the OBR forecast is predicated on significantly more borrowing and a swift resolution to the euro crisis.

are they capable of 'swift' ? Nothing I've seen anyone do yet resembles this.... lots of 'um' and 'oh' ! :rotfl: