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Final Gdp For Q2 Revised Down!

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This is primarily due to methodological changes in the way ONS calculates volume GDP, in particular the change from using RPI to CPI for the deflator.

As a result past UK GDP numbers have generally been revised upwards (because CPI has generally been lower than RPI). Since 1998 the average annual revision is +0.2%. However the recession now sees a sharper peak-to-trough drop in output, and Q1/Q2 2011 quarters have both been revised down 0.1%.

Here's a table showing the overall quarterly effects since 2007:

GDP_revisions_1011.gif

Annual volume revisions as a result of changes:

GDP_revisions_1011b.gif

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From 0.2% to 0.1%

But actually, he thought as he re-adjusted the Ministry of Plenty's figures, it was not even forgery. It was merely the substitution of one piece of nonsense for another. Most of the material that you were dealing with had no connexion with anything in the real world, not even the kind of connexion that is contained in a direct lie. Statistics were just as much a fantasy in their original version as in their rectified version.

George Orwell, 1984

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This is primarily due to methodological changes in the way ONS calculates volume GDP, in particular the change from using RPI to CPI for the deflator.

As a result past UK GDP numbers have generally been revised upwards (because CPI has generally been lower than RPI). Since 1998 the average annual revision is +0.2%. However the recession now sees a sharper peak-to-trough drop in output, and Q1/Q2 2011 quarters have both been revised down 0.1%.

Here's a table showing the overall quarterly effects since 2007:

GDP_revisions_1011.gif

This time yesterday the impression was that the UK economy had grown just 0.2% in the last nine months. With this new data, it's actually been flat for those nine months...

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This time yesterday the impression was that the UK economy had grown just 0.2% in the last nine months. With this new data, it's actually been flat for those nine months...

Here's what the ONS has to say about the latest quarters:

GDP growth in the first and second quarters of 2011 have both been revised down by 0.1

percentage points. This is due to a combination of methodological changes, classification

changes and the inclusion of new data. The weakness of growth in both quarters, particularly

the second quarter, reflects a number of pressures that are being felt in the wider economy

by both business and households. These include:

• continuing declines in real wage growth, which resulted in declines in consumer demand and

consumer confidence;

• an uncertain labour market, which can feed through to weaker consumer confidence and

consumption;

• relatively high rates of inflation and in particular high and rising commodity prices, though this

is offset to some extent by relatively low growth of labour costs;

• a weakening global economic position, in particular the UK's key export markets of the euro

area, wider Europe and the US;

• volatility and weakness in financial markets;

• low returns on saving.

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Here's what the ONS has to say about the latest quarters:

GDP growth in the first and second quarters of 2011 have both been revised down by 0.1

percentage points. This is due to a combination of methodological changes, classification

changes and the inclusion of new data. The weakness of growth in both quarters, particularly

the second quarter, reflects a number of pressures that are being felt in the wider economy

by both business and households. These include:

• continuing declines in real wage growth, which resulted in declines in consumer demand and

consumer confidence;

• an uncertain labour market, which can feed through to weaker consumer confidence and

consumption;

• relatively high rates of inflation and in particular high and rising commodity prices, though this

is offset to some extent by relatively low growth of labour costs;

• a weakening global economic position, in particular the UK's key export markets of the euro

area, wider Europe and the US;

• volatility and weakness in financial markets;

• low returns on saving.

Good list. Shame they didn't add people forking out over the odds to put a roof over their heads

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Good list. Shame they didn't add people forking out over the odds to put a roof over their heads

Well, don't worry, they're certainly accounting for it, and a suspicious mind might conclude that they're cooking the books in order to massage higher nominal GDP numbers.

In just three years they have increased the owner-occupier imputed rent figure by 31% (Q2 2008 = £21,553m, Q2 2011 = £28,282m). How the heck can they possibly justify this?

The same goes for actual rents paid by tenants – neither the CPI nor the RPI reflect anything like the ONS implied deflators for rents.

HFCE_housing_1011.gif

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Not really surprising, the economy is barely treading water. Can't be too long before it goes negative and then we can look forward to Ed Balls telling us all the Govt should borrow and spend more as it's the right thing to do to get growth....

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Not really surprising, the economy is barely treading water. Can't be too long before it goes negative and then we can look forward to Ed Balls telling us all the Govt should borrow and spend more as it's the right thing to do to get growth....

The worrying thing is that an awful lot of GDP comes from government expenditure, the area that the ConLibs say they will cut, though they havent so far. I dont see how they can go and make these necessary cuts, and keep GDP growing at the rate that they need to allow them to tackle the deficit, that needs an heroic performance from the private sector that clearly cant get off of the floor due to the tax burden of paying banks, EU corruption, public sector non jobs and a growing pensioner population amongst others. Instead of starting from a point of saying what can we tax, and then ensuring expenditure matches that, politicians have started with who needs what, and spent according to that.

Any policy of getting real with those who rely on the state for their free stuff is likely to prove unpopular.

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The worrying thing is that an awful lot of GDP comes from government expenditure, the area that the ConLibs say they will cut, though they havent so far. I dont see how they can go and make these necessary cuts, and keep GDP growing at the rate that they need to allow them to tackle the deficit, that needs an heroic performance from the private sector that clearly cant get off of the floor due to the tax burden of paying banks, EU corruption, public sector non jobs and a growing pensioner population amongst others. Instead of starting from a point of saying what can we tax, and then ensuring expenditure matches that, politicians have started with who needs what, and spent according to that.

Any policy of getting real with those who rely on the state for their free stuff is likely to prove unpopular.

Interesting looking at the expenditure components for Q2 2011:

Exports of goods and services: Largest decrease (-1.3%) for 8 quarters, since 2009 Q2

Imports of goods and services: Smallest decrease (-0.3%) for 2 quarters, since 2010 Q4

Household consumption: Largest decrease (-0.8%) for 9 quarters, since 2009 Q1

Gross fixed capital consumption: Largest increase (1.7%) for 5 quarters, since 2010 Q1

Government consumption: Largest increase (1.1%) for 13 quarters, since 2008 Q1

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Extracts from economists' comments on the GDP numbers, via the Guardian:

http://www.guardian.co.uk/business/economics-blog/2011/oct/05/uk-gdp-what-economists-say

Jonathan Loynes, chief European economist at Capital Economics:

...the figures provide further justification for the MPC to launch QE2 very soon and may just tip the balance towards a move tomorrow rather than next month.

Alan Clarke, UK economist at Scotia Capital

There is a lot of material for the Bank to crunch through, but at face value it points to a sharp downward revision to its growth projection in the November Inflation Report – confirming it is a case of when, not if for QE2. That may not happen in time for tomorrow's Monetary Policy Committee meeting, nonetheless, at the margins it does boost the case for an earlier restart of QE (i.e. this week).

James Knightley, economist at ING Financial Markets

It is only a matter of time before we see more QE... With the Fed consistently highlighting that QE2 was less effective than QE1 in the US we suspect QE2 in the UK will amount to around an extra £300bn of asset purchases. This would bring the total spend to half a trillion pounds.

Graeme Leach, chief economist at the Institute of Directors

The GDP revisions make a very strong case to launch QE2...

Howard Archer, economist at IHS Global Insight

...the Bank of England seems highly likely to launch further quantitative easing in the near term, and we believe it is touch and go whether it acts as soon as Thursday or waits until November when the MPC will have the central bank's new GDP growth and inflation forecasts.

Scott Corfe at the Centre for Economics and Business Research

This only strengthens the case for further quantitative easing from the Bank of England to prop up the economy over the coming quarters– we expect an additional £50bn of asset purchases to be announced before the end of the year.

John Hawksworth, chief economist at PwC

With growth so weak, the MPC should seriously consider resuming its quantitative easing programme after its meeting tomorrow.

Nida Ali, economic adviser to the Ernst & Young ITEM Club

These results will heighten tensions in the MPC meeting scheduled for tomorrow. Although more QE is unlikely to be announced as early as this month, these results heighten the possibility of it being implemented sometime in the near future.

--------

Not a single argument given on the risks of implementing another round of QE even though several of the factors cited by the ONS for weak Q2 growth (declining real wage growth, relatively high inflation, high commodity prices, low returns on saving) are arguably a direct consequence of BoE money printing.

Edit: spelling

Edited by FreeTrader

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Interesting looking at the expenditure components for Q2 2011:

Exports of goods and services: Largest decrease (-1.3%) for 8 quarters, since 2009 Q2

Imports of goods and services: Smallest decrease (-0.3%) for 2 quarters, since 2010 Q4

Household consumption: Largest decrease (-0.8%) for 9 quarters, since 2009 Q1

Gross fixed capital consumption: Largest increase (1.7%) for 5 quarters, since 2010 Q1

Government consumption: Largest increase (1.1%) for 13 quarters, since 2008 Q1

Interesting find.

Can anyone work out how we are going to get 2.5% growth if all that growth has to come from the private sector, given that there has been no tax reductions on the private sector, and no pay cuts in the public sector to make private sector employment more attractive?

Without that growth, we are headed towards where Greece is now.

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Well, don't worry, they're certainly accounting for it, and a suspicious mind might conclude that they're cooking the books in order to massage higher nominal GDP numbers.

In just three years they have increased the owner-occupier imputed rent figure by 31% (Q2 2008 = £21,553m, Q2 2011 = £28,282m). How the heck can they possibly justify this?

The same goes for actual rents paid by tenants – neither the CPI nor the RPI reflect anything like the ONS implied deflators for rents.

HFCE_housing_1011.gif

Bugger me. I never knew that imputed rents were in that figure. Crikey.

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Meanwhile, at the London Stock Exchange...

Up 2.3% despite this news and Italy's credit rating being downgraded. WTF?

Sooner/bigger Quantitative Easing.

We're back to the 'bad news is GOOD news for shares' phase that we were in until recently.

Fill your boots! (not)

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Extracts from economists' comments on the GDP numbers, via the Guardian:

http://www.guardian.co.uk/business/economics-blog/2011/oct/05/uk-gdp-what-economists-say

Jonathan Loynes, chief European economist at Capital Economics:

...the figures provide further justification for the MPC to launch QE2 very soon and may just tip the balance towards a move tomorrow rather than next month.

Alan Clarke, UK economist at Scotia Capital

There is a lot of material for the Bank to crunch through, but at face value it points to a sharp downward revision to its growth projection in the November Inflation Report – confirming it is a case of when, not if for QE2. That may not happen in time for tomorrow's Monetary Policy Committee meeting, nonetheless, at the margins it does boost the case for an earlier restart of QE (i.e. this week).

James Knightley, economist at ING Financial Markets

It is only a matter of time before we see more QE... With the Fed consistently highlighting that QE2 was less effective than QE1 in the US we suspect QE2 in the UK will amount to around an extra £300bn of asset purchases. This would bring the total spend to half a trillion pounds.

Graeme Leach, chief economist at the Institute of Directors

The GDP revisions make a very strong case to launch QE2...

Howard Archer, economist at IHS Global Insight

...the Bank of England seems highly likely to launch further quantitative easing in the near term, and we believe it is touch and go whether it acts as soon as Thursday or waits until November when the MPC will have the central bank's new GDP growth and inflation forecasts.

Scott Corfe at the Centre for Economics and Business Research

This only strengthens the case for further quantitative easing from the Bank of England to prop up the economy over the coming quarters– we expect an additional £50bn of asset purchases to be announced before the end of the year.

John Hawksworth, chief economist at PwC

With growth so weak, the MPC should seriously consider resuming its quantitative easing programme after its meeting tomorrow.

Nida Ali, economic adviser to the Ernst & Young ITEM Club

These results will heighten tensions in the MPC meeting scheduled for tomorrow. Although more QE is unlikely to be announced as early as this month, these results heighten the possibility of it being implemented sometime in the near future.

--------

Not a single argument given on the risks of implementing another round of QE even though several of the factors cited by the ONS for weak Q2 growth (declining real wage growth, relatively high inflation, high commodity prices, low returns on saving) are arguably a direct consequence of BoE money printing.

Edit: spelling

What I despair at is that these so called economists ONLY suggest QE as a possible solution. I am actually for QE, I think it helps, but only as part of a general change in policy, which includes massively reducing government expenditure so that taxes can be reduced on the private sector. You have to get more and better bodies into the private sector to solve this problem, the non-jobs in public sector quangoes mop up intelligent and hard working people that would otherwise be productive, and give us another slug of tax to levy on those that are left in the private sector. Unless there is a change to the allocation of resources in this country, more QE will do nothing except make banks and their top men richer at everyone else's expense.

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Extracts from economists' comments on the GDP numbers, via the Guardian:

http://www.guardian.co.uk/business/economics-blog/2011/oct/05/uk-gdp-what-economists-say

Jonathan Loynes, chief European economist at Capital Economics:

...the figures provide further justification for the MPC to launch QE2 very soon and may just tip the balance towards a move tomorrow rather than next month.

Alan Clarke, UK economist at Scotia Capital

There is a lot of material for the Bank to crunch through, but at face value it points to a sharp downward revision to its growth projection in the November Inflation Report – confirming it is a case of when, not if for QE2. That may not happen in time for tomorrow's Monetary Policy Committee meeting, nonetheless, at the margins it does boost the case for an earlier restart of QE (i.e. this week).

James Knightley, economist at ING Financial Markets

It is only a matter of time before we see more QE... With the Fed consistently highlighting that QE2 was less effective than QE1 in the US we suspect QE2 in the UK will amount to around an extra £300bn of asset purchases. This would bring the total spend to half a trillion pounds.

Graeme Leach, chief economist at the Institute of Directors

The GDP revisions make a very strong case to launch QE2...

Howard Archer, economist at IHS Global Insight

...the Bank of England seems highly likely to launch further quantitative easing in the near term, and we believe it is touch and go whether it acts as soon as Thursday or waits until November when the MPC will have the central bank's new GDP growth and inflation forecasts.

Scott Corfe at the Centre for Economics and Business Research

This only strengthens the case for further quantitative easing from the Bank of England to prop up the economy over the coming quarters– we expect an additional £50bn of asset purchases to be announced before the end of the year.

John Hawksworth, chief economist at PwC

With growth so weak, the MPC should seriously consider resuming its quantitative easing programme after its meeting tomorrow.

Nida Ali, economic adviser to the Ernst & Young ITEM Club

These results will heighten tensions in the MPC meeting scheduled for tomorrow. Although more QE is unlikely to be announced as early as this month, these results heighten the possibility of it being implemented sometime in the near future.

--------

Not a single argument given on the risks of implementing another round of QE even though several of the factors cited by the ONS for weak Q2 growth (declining real wage growth, relatively high inflation, high commodity prices, low returns on saving) are arguably a direct consequence of BoE money printing.

Edit: spelling

Yes, the 'push' to pave the way in the general mass media began a few weeks back with BBC News, Channel 4 News etc running small pieces about more QE being a done deal.

More money printing should come as no surprise at all to regular posters on HPC.

Nor should the next batch in about a year or so, nor the next batch after that .....

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Sooner/bigger Quantitative Easing.

We're back to the 'bad news is GOOD news for shares' phase that we were in until recently.

Fill your boots! (not)

This is just flat out wrong.

There is next to no correlation between uk data and the performance of the LSE.

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The worrying thing is that an awful lot of GDP comes from government expenditure, the area that the ConLibs say they will cut, though they havent so far. I dont see how they can go and make these necessary cuts, and keep GDP growing at the rate that they need to allow them to tackle the deficit, that needs an heroic performance from the private sector that clearly cant get off of the floor due to the tax burden of paying banks, EU corruption, public sector non jobs and a growing pensioner population amongst others. Instead of starting from a point of saying what can we tax, and then ensuring expenditure matches that, politicians have started with who needs what, and spent according to that.

Any policy of getting real with those who rely on the state for their free stuff is likely to prove unpopular.

In other words, the private sector.

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Yes, the 'push' to pave the way in the general mass media began a few weeks back with BBC News, Channel 4 News etc running small pieces about more QE being a done deal.

More money printing should come as no surprise at all to regular posters on HPC.

I wouldn't be surprised if they got nothing tomorrow. 'Economist' who've run out of ideas and a desperate government can say what they like, it all comes down to whether the CB thinks more QE is good for the banking system at this point in time.

There might be lots of disappointed people tomorrow.

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  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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