Economic growth slows to 0.3%

Thrugelmir

kabayiri wrote: »

Are we a labour intensive society now?

Services sector accounts for 70% of the economy. So in a broad sense we are dumber. As have lost skills in many commercial sectors. In the past elders taught the apprentices. As the elders die or retire so does the knowledge.

dktreesea

CLAPTON wrote: »

what's economic growth of 2.4% got to do with houses prices?

Plenty. It's to do with the way "growth" is calculated, because it takes something called imputed rents into account, which are the rents that could be earned on all property, including owner occupied property, based on the usually rising asset values of the said properties.


So as long as housing keeps going up in value, we get "growth" in the imputed rents and therefore the economy. So the house is treated as a productive activity, and a providor of a service to the householder. The value of that service is the rent the householder would have received if they had rented the house out to a tenant instead of living in it themselves.


One of the problems with this approach is it assumes that the householders therefore have the equivalent in the current market rate for renting an equivalent property to spend on other things. But this is often not the case. Say a householder bought their property for £30k way back when. Today it is worth £300k. Say to rent it at today's rates would cost £1,500 a month. It doesn't then follow that the householder has £1,500 in uncommitted funds each month to spend on other things. Yet that £1,500 a month is added into GDP.

dktreesea

Generali wrote: »

Developed economies are consumer spending though. People make stuff and that stuff is consumed allowing the makers to consume stuff.

A rise in consumer spending is more stuff sold and bought which is more GDP and more jobs.

If people ain't buying what you sell then you ain't selling anything and can't buy. Either we trade and consume or we make our own clothes from the flax we can grow in the back garden.

Housing and consumer spending are quite closely linked though. If people have to spend too much on housing, then they consume less of everything else. Plus if they are unable to buy the appropriate size of housing they need, either because the houses being built are getting smaller, or they simply can't afford to trade up, then something has to give. And that something may well be consumer goods.


So much of what used to go on in the 70s and 80s, like redecorating every few years, buying new kitchen appliances even though the one already there still worked (it just wasn't colour coordinated/the right brand/whatever other useless excuse to buy stuff that wasn't needed that was dreamed up at the time), buying all kinds of knick knacks, just don't seem to happen these days.


Imagine the impact this site alone has had on consumer spending. Giving up a shopping addiction is probably a bit like giving up smoking; once you decide to give it up you never go back to it.

Generali

michaels wrote: »

Don't be silly, hair cuts, lattes and indeed 'legal services' are not proper output. Proper output is stuff you can touch...and to be honest only big heavy things made of metal or concrete, none of that plastic and silicon carp....

If a latte or a haircut makes me happier then it is as valid output as a car or a teabag.

ruggedtoast

If you think growth is low now wait until we have a Tory Ukip coalition driving a wedge between us and the EU.

I really hope that people who care about freedom of movement and plural democracy get motivated in May to stop these cretins at the ballot box.

shortchanged_2

CLAPTON wrote: »

it seems that the USA economy only grew by 0.2% in the first quarter of the year

presumably this is all the fault of the the UK low growth of 0.3%

I'd imagine it's due to the removal of QE. The wearing off of the funny money effect. How real is any of this recovery?

Generali

dktreesea wrote: »

Housing and consumer spending are quite closely linked though. If people have to spend too much on housing, then they consume less of everything else. Plus if they are unable to buy the appropriate size of housing they need, either because the houses being built are getting smaller, or they simply can't afford to trade up, then something has to give. And that something may well be consumer goods.

On the other hand you have the Wealth Effect: the rise in the value of peoples' wealth (houses included) makes them feel they can consume more and spend less.

The increase in the value of their wealth is enough to satisfy them: it doesn't matter if that comes from saving or asset price growth.

padington

Generali wrote: »

On the other hand you have the Wealth Effect: the rise in the value of peoples' wealth (houses included) makes them feel they can consume more and spend less.

The increase in the value of their wealth is enough to satisfy them: it doesn't matter if that comes from saving or asset price growth.

For the people who are renting at historic highs, you must also have something akin to a poverty effect for them though and as this group grows this effect must get worse, no ?

Generali

padington wrote: »

For the people who are renting at historic highs, you must also have something akin to a poverty effect for them though and as this group group grows this effect must get worse, no ?

Kinda. As people's wealth grows they consume more and as it falls they consume less. If people aren't accumulating wealth at all then the entire relationship breaks down.

The thing is, while more people are renting, rents are increasing below the rate of inflation (for those in private accommodation) so the cost of their rent relative to other goods and services is falling.

I suppose the simpler way to put that is that it's complicated. The macro economy is, for the most part, the sum of the micro. The impact of all this will vary from person-to-person. Someone on a zero hours contract trying to commute and getting micked about by their boss is probably doing very badly. Someone choosing to rent near work who is making good money as an IT contractor in the City is probably doing well.

Let's face it, low paid casual workers have always done badly. That they may be doing badly in a different way to a couple of decades ago is neither here nor there really.

tincans6

Generali wrote: »

If a latte or a haircut makes me happier then it is as valid output as a car or a teabag.

One good reason why a car or teabag might be more useful is that you can trade it to someone elsewhere in the world for some bananas, wine, coffee beans (to make the latte), steel (to make the scissors to cut the hair) or an Iphone.

I've yet to see a latte or haircut be exported (we shall ignore tourism as naturally we have a deficit in that as well).

Lots of services we can sell abroad, from legal services to premier league football to education, however it seems increasingly the case that we can't produce enough stuff or services that we can sell abroad - at least compared to the stuff we want to import.

And its getting worse.