Austerity is working?

Graham_Devon

The downgrade from the IMF caused quite a stir on here, with austerity holding most of the blame for the downgrade.

However, the IMF are now to upgrade UK growth. The IMF said last time around that the UK economy could not withstand the austerity plans.

Not sure we've really seen much austerity myself, but hey ho. At least whatever we have seen is proven to be working.

In a move that will be seen as a victory for the Treasury in its row with the global financial watchdog over economic policy, the IMF is likely to lift its growth forecast for this year from 0.7pc to as much as 1pc on Tuesday.

A revision on that scale would cancel out the body’s downgrade in April that prompted the IMF’s chief economist, Olivier Blanchard, to warn the Chancellor that he was “playing with fire” and should “consider adjustment to the original fiscal plans”.

The comments sparked a war of words between the IMF and Treasury. It culminated in the IMF’s recommendation in May that the Government borrow as much as £10bn extra this year for infrastructure projects to offset austerity. George Osborne rejected the proposal.

Since then, the recovery has begun to accelerate with growth of 0.3pc in the first quarter and forecasts for 0.5pc or 0.6pc in the three months to June.

“It is very likely that the IMF is going to move its forecasts up for 2013,” George Buckley, Deutsche Bank’s UK economist, said. “The only way they could stick to their current forecast is if they believed GDP would grow at less than 0.3pc for all the remaining quarters.”

http://www.telegraph.co.uk/finance/economics/10164859/IMF-to-change-tune-on-UK-economy-and-raise-growth-forecast.html

HAMISH_MCTAVISH

No.

Rising house prices, an increase in lending, and improved service sector activity are working.

This nascent recovery is despite austerity, not because of it.

We still have to deal with the consequences of the worst and slowest recovery in history, because of austerity, however.

Graham_Devon

HAMISH_MCTAVISH wrote: »

No.

Rising house prices, an increase in lending, and improved service sector activity are working.

Are house prices really included in IMF growth reports? And not so sure about lending. It may have risen for housing purchases, but it's fallen for business lending over the past few months.

Not sure the IMF would just look at mortgage lending while ignoring business lending (if indeed, they look at lending as growth, rather than output).

HAMISH_MCTAVISH

......the economic figures have started to suggest that the British economy is pulling out of its longest and deepest recession on record.

One of the main reasons for this turnaround has been a sudden pickup in housing prices and mortgage lending, the traditional driving forces of the British economy.

http://blogs.reuters.com/anatole-kaletsky/2013/07/05/who-will-get-credit-for-britains-economic-turnaround/

Graham_Devon

Does the IMF look at house prices though?

That's nothing to do with the IMF. If it does (I genuinely don't know), howcome we didn't achieve bigger growth when house prices were rising 20% an annum?

HAMISH_MCTAVISH

Eh?

Rising prices are helping to spur economic growth.

Whether or not they're directly measured isn't the point.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Eh?

Rising prices are helping to spur economic growth.

Whether or not they're directly measured isn't the point.

How are rising prices helping to sput growth? What growth? In what industry? And how have house prices rising contributed to this directly?

I'm not trying to be difficult, I just genuinely don't get how prices rising 3% over the last year can spur any economic growth bar a few more sales in Estate Agents?

You appear to be implying that because house prices are up, people are out there spending more? I'd agree if we'd seen extra investment in house building etc, but we haven't. We built more in 2010.

You've made a rather bold statement and then stated "whether they are measured or not isn't the point". It kinda is the point when they are measuring growth estimates!

HAMISH_MCTAVISH

Graham_Devon wrote: »

You've made a rather bold statement !

Suggest you refer your question to the economist that said it.

One of the main reasons for this turnaround has been a sudden pickup in housing prices and mortgage lending, the traditional driving forces of the British economy.

Anatole Kaletsky.

Anatole Kaletsky is an award-winning journalist and financial economist who has written since 1976 for The Economist, the Financial Times and The Times of London before joining Reuters.

You can reach him via Reuters.:)

Graham_Devon

HAMISH_MCTAVISH wrote: »

Suggest you refer your question to the economist that said it.

So you don't know?

Rinoa

HAMISH_MCTAVISH wrote: »

Anatole Kaletsky.

Is that the same Anatole Kaletsky who said in Jan 2008:

"The global credit crisis, far from taking a turn for the worse, is now almost over" and "There will be no US recession" and "Stock markets around the world will rise in 2008".

http://www.theaustralian.com.au/news/how-we-all-got-it-wrong/story-e6frg9mx-1111118432361

I wonder how much Reuters pay him for his words of wisdom.

Thrugelmir

Graham_Devon wrote: »

However, the IMF are now to upgrade UK growth. The IMF said last time around that the UK economy could not withstand the austerity plans.

Many of the "plans" have no had yet had time to make an impact, or potentially never will. Was always going to be a long hard slog. With blips along the way as other unexpected events make revisions necessary.