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Thread: UK back in recession?

  1. #1

    Default UK back in recession?

    Just-released official figures for Q4-2010 show a 0.5% contraction in the economy. The worst December weather ever is almost certainly to blame and put an unexpected dampener on the Christmas shopping, it had already been reported that shops lost billions due to that as customers couldn't reach the shops while online retailers also struggled (I didn't order a Christmas present online as I wasn't sure it would be delivered on time due to the snow). However a lot of marketing etc had gone into getting extra shopping (especially big-ticket items like cars) to "beat the VAT increase". Experts had still predicted growth.

    This January has been quite slow to due to the VAT-increase, normally cheaper than pre-Christmas sales are instead having more expensive prices than previously and when I went to the Trafford Centre just after the VAT-increase it was a ghost town. Normally you can't find easy parking in December/January.

    Given the VAT etc I'd expected Q1-2011's sales to be lower but Q4-2010's to be higher, if that's happened yet Q4 is a contraction then there's got to be a significant chance that Q1-2011 will result in a contraction to and put us officially back in technical recession

    The one saving grace may be the snow. Last year January had awful snow again which we haven't had this January, so that may make a difference.

  2. #2
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    I'm a bit surprised it's hitting so soon. You'd expect some effects due to austerity programs, but not before they'd really taken effect.
    Congratulations America

  3. #3
    I don't think this can reasonably be pinned on the austerity program - though some will no doubt try. It is as you said too soon.

    EDIT: State spending for Q4 2010 was up 5.2% higer than Q4 2009, so no austerity wasn't the issue.
    Last edited by RandBlade; 01-25-2011 at 03:04 PM.

  4. #4
    Indeed, austerity isn't the culprit; nor is likely the weather (given that Europe had similar weather and early indicators seem to point towards a better result than the UK). Apparently, even with weather effects stripped out it probably would have been about 0% growth, which is a pretty awful result. I honestly don't know why the UK has had such uniquely poor economic results lately, but I think a fair prediction for 2011 is minimal to negative growth, given the growing impact of austerity coupled with other structural issues. This isn't to say austerity isn't a good idea in principle, but it's going to hurt.

  5. #5
    Uniquely poor? What's the unique part?

  6. #6
    The US' annual growth is projected at 3% (although this is partially due to continuing fiscal and monetary stimulus); the eurozone is weaker but still positive. Of the developed economies, the UK is definitely faring poorly - not as badly as countries facing sovereign debt crises, but definitely below par.

  7. #7
    Quote Originally Posted by wiggin View Post
    Indeed, austerity isn't the culprit; nor is likely the weather (given that Europe had similar weather and early indicators seem to point towards a better result than the UK).
    We are better suited for this kind of winters as they are normal to us. (Funny that you have not written a "the rest of" in front of Europe)
    "Wer Visionen hat, sollte zum Arzt gehen." - Helmut Schmidt

  8. #8
    It seems predictably insane for people to bash "austerity" as the source of these numbers. Has government spending actually declined that much in the past year? And is the solution actually borrowing more money with a sovereign debt crisis next door?

  9. #9
    Year - Total Spending (in billions of pounds)
    2007 - 543.96
    2008 - 575.68
    2009 - 621.72
    2010 - 660.90
    2011 - 681.42
    Hope is the denial of reality

  10. #10
    Quote Originally Posted by Dreadnaught View Post
    It seems predictably insane for people to bash "austerity" as the source of these numbers. Has government spending actually declined that much in the past year? And is the solution actually borrowing more money with a sovereign debt crisis next door?
    This is indeed rather disingenuous for someone to suggest that austerity did it; most of the decline happened prior to austerity taking effect, and we won't really see much of how that effects growth until next quarter. I think it's fairly reasonable to assume that next year austerity won't help growth (though in the medium term it may), but the current growth numbers do not give us a reading on how much effect it will have.

    That being said, the timing of austerity is always difficult, and they may have pulled the trigger a little early (especially given the UK's average maturation on their debt, which gives them some room to maneuver). Then again, it might have only been politically possible now, and it's definitely true that the UK (and many other countries) desperately needed to reduce their primary deficits, and eventually their debt loads.

    Personally, I would have liked some more short term stimulus (a la the US, albeit with better allocated stimulus instead of the weird compromise they reached in December) but coupled with an ironclad plan for medium-term austerity and fiscal consolidation, and a long-term plan to address growing entitlement costs.

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