Jump to content
House Price Crash Forum
PeanutButter

U.K. Economy Unexpectedly Shrinks for First Time Since 2012

Recommended Posts

 

Quote

 

The U.K. economy shrank for the first time in more than six years in the second quarter, delivering a blow to newly installed Prime Minister Boris Johnson.

Gross domestic product fell 0.2% following a solid 0.5% advance in the previous three months, the Office for National Statistics said on Friday. Economists had expected output to be unchanged. In June alone, the economy stagnated. The pound fell after the report, sliding to $1.2096 as of 9:32 a.m. in London.

The abrupt loss of momentum came as many firms ran down inventories built up ahead of the original March 29 deadline to leave the European Union. Stock levels fell by 4.4 billion pounds ($5.3 billion), knocking 2.15 percentage points off GDP.

The economy was also hit by auto factories bringing forward summer maintenance shutdowns to April to avoid the threat of supply disruptions around the original Brexit deadline.

Manufacturing, which enjoyed a bumper first quarter, shrank 2.3% in the following three months, the most since 2009.

The GDP figures are the first since Johnson became premier last month, vowing to take Britain out of the EU on the new deadline of Oct. 31, with or without a deal to cushion the blow.

While a modest recovery is forecast in the third quarter, the underlying pace of growth appears to be slowing in the face of heightened Brexit uncertainty and a world economy edging close toward its first recession in a decade. Another quarter of contraction would push Britain into a technical recession.

 

https://www.bloomberg.com/news/articles/2019-08-09/u-k-economy-unexpectedly-shrinks-for-first-time-since-2012

Share this post


Link to post
Share on other sites

This is quite interesting news - UK Q2 is distorted as they've mentioned by the fact that Q1 contained some demand pulled forward for Brexit stockpiling, but the whole world economy does feel a bit overdue a recession. 

Share this post


Link to post
Share on other sites

I mean, did it really take a genius to figure out that if the UK stockpiled to unprecedented levels, then the next quarter would be negative?

Quote

Tej Parikh, chief economist at the Institute of Directors, said:

Contraction in the second quarter is a rude awakening after the growth in the first three months of the year

Dude the first three months were shit, stockpiling adds to the GDP figure, but is it good growth? 

Share this post


Link to post
Share on other sites
12 minutes ago, zugzwang said:

How's the new PM going to spin this as good news? Blame it on EU intransigence, presumably.

Ack! Ack! Ack!

He will do a Trump or a Greyling, just avoid the topic and divert attention (con people really)

Share this post


Link to post
Share on other sites

Sadly we've all been here before. I got so excited in 2008. Freshly graduated, good job and prospects and just waiting for the correction that never came (well it did a bit but rapidly reinforced). 

Now I take the view down is the new up. Economy shrinks, rates go negative, great news for the debt ridden. Now I'm on the other side of this we'll have to wait and see. 

Share this post


Link to post
Share on other sites

We have a reaction of our new chancellor

Quote

This is a challenging period across the global economy, with growth slowing in many countries. But the fundamentals of the British economy are strong – wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year.

And I thought a robust economy is made by investment and growth prospects. 

I love how it compares itself to ailing countries... 

Politician speak I guess

Edited by Freki

Share this post


Link to post
Share on other sites
1 hour ago, thewig said:

How much “growth” in the U.K. “economy” is accounted for by the black magick accounting trick known as “imputed rent”?

British people have been deceived for a long time with stats such as price inflation (doesn't include the single biggest cost a person has to meet of a putting a roof over one's head, or measure 'shrinkflation') and GDP (DOES include strangely the cost - strangely adjudged a 'product' -  of the rent you don't pay as a homeowner).

A really good question as to why the above is true to ask of your prospective MP when (s)he comes knocking IMO.

Probably won't even be aware though sadly!

 

 

 

Share this post


Link to post
Share on other sites
19 minutes ago, zilly said:

British people have been deceived for a long time with stats such as price inflation (doesn't include the single biggest cost a person has to meet of a putting a roof over one's head, or measure 'shrinkflation')

That's only partially true - the ONS publish a lot of stuff about shrinkflation https://www.ons.gov.uk/economy/inflationandpriceindices/articles/theimpactofshrinkflationoncpihuk/howmanyofourproductsaregettingsmaller#estimating-the-proportion-of-products-in-the-cpih-basket-with-size-changes

The majority of products are either ones where it's measured per unit of weight (eg cost of cheese per kg, a pint of milk/beer etc) or where shrinkflation doesn't really apply (a dozen eggs, a T-Shirt, the cost of a ticket to a Premier League football game etc).

It's only in a few very corner cases that shrinkflation impacts RPI or CPI.   For example, the cost of a doughnut is in the RPI basket.  If bakeries make slightly smaller doughnuts that impact would probably be missed.

When you think how much money people spend on mortgage interest, energy costs, petrol, childcare etc the impact of doughnut shrinkflation on RPI is lost in the rounding anyway.

 

Share this post


Link to post
Share on other sites
26 minutes ago, zilly said:

British people have been deceived for a long time with stats such as price inflation (doesn't include the single biggest cost a person has to meet of a putting a roof over one's head, or measure 'shrinkflation') and GDP (DOES include strangely the cost - strangely adjudged a 'product' -  of the rent you don't pay as a homeowner).

A really good question as to why the above is true to ask of your prospective MP when (s)he comes knocking IMO.

Probably won't even be aware though sadly!

 

 

 

Add that to the list of questions you should put to your prospective MP...the first of which should be whether they think using housing as a mechanism to deliberately transfer wealth from the poor and young to the wealthy and old will pass without serious consequences.

Share this post


Link to post
Share on other sites

Apart from the problems with GDP definition/measurement, it's also very telling that politicians talk about GDP, whereas GDP per capita is what most people should care about.

Share this post


Link to post
Share on other sites
35 minutes ago, opt_out said:

Apart from the problems with GDP definition/measurement, it's also very telling that politicians talk about GDP, whereas GDP per capita is what most people should care about.

Are we not fifth/sixth greatest in the world then?

Share this post


Link to post
Share on other sites
2 hours ago, scottbeard said:

That's only partially true - the ONS publish a lot of stuff about shrinkflation https://www.ons.gov.uk/economy/inflationandpriceindices/articles/theimpactofshrinkflationoncpihuk/howmanyofourproductsaregettingsmaller#estimating-the-proportion-of-products-in-the-cpih-basket-with-size-changes

The majority of products are either ones where it's measured per unit of weight (eg cost of cheese per kg, a pint of milk/beer etc) or where shrinkflation doesn't really apply (a dozen eggs, a T-Shirt, the cost of a ticket to a Premier League football game etc).

It's only in a few very corner cases that shrinkflation impacts RPI or CPI.   For example, the cost of a doughnut is in the RPI basket.  If bakeries make slightly smaller doughnuts that impact would probably be missed.

When you think how much money people spend on mortgage interest, energy costs, petrol, childcare etc the impact of doughnut shrinkflation on RPI is lost in the rounding anyway.

 

Shrinkflation doesn't account for content substitution i.e. horse meat instead of beef.

Share this post


Link to post
Share on other sites
7 hours ago, scottbeard said:

That's only partially true - the ONS publish a lot of stuff about shrinkflation https://www.ons.gov.uk/economy/inflationandpriceindices/articles/theimpactofshrinkflationoncpihuk/howmanyofourproductsaregettingsmaller#estimating-the-proportion-of-products-in-the-cpih-basket-with-size-changes

The majority of products are either ones where it's measured per unit of weight (eg cost of cheese per kg, a pint of milk/beer etc) or where shrinkflation doesn't really apply (a dozen eggs, a T-Shirt, the cost of a ticket to a Premier League football game etc).

It's only in a few very corner cases that shrinkflation impacts RPI or CPI.   For example, the cost of a doughnut is in the RPI basket.  If bakeries make slightly smaller doughnuts that impact would probably be missed.

When you think how much money people spend on mortgage interest, energy costs, petrol, childcare etc the impact of doughnut shrinkflation on RPI is lost in the rounding anyway.

 

Why is the cost of doughnuts even in the shrinkflation index in the first place?

I don't eat them and I don't know and never have known anybody who does other than my Mrs whom I don't let near them and Homer Simpson who spends $5,000 a year on them.

I was told, anecdotally and not substantiated by me, that bowling balls for ten pin were in the index about a decade ago and may still be for all I know.

Cut out the c*ap and leave rail fares, gas and electric, second hand cars (good ones), a selection of everyday foods and entertainment venues during school holidays and you'd probably find it's 40% in the last three years.

Anyone know if it's true that Gordon Brown moved the National Statistical Office to Newport so that older, conscientious and knowledgeable staff would opt for redundancy and retirement and then replaced them with malleable graduates for whom lying was the way you kept your job?

I don't know either but that I can find it quite believable is deeply worrying in itself.

Share this post


Link to post
Share on other sites
4 hours ago, reddog said:

God, there is nothing that makes me cringe more than that line

+1.

As said above it's around 23rd if measured by GDP per head but around 6th in terms of overall scale.

Now which would you want to invest in? A company with large turnover which consistently makes losses or a much smaller highly profitable entity?

That's purely an analogy, I'm aware that countries do not operate financially at all like corporations. 

Share this post


Link to post
Share on other sites
5 hours ago, Freki said:

And even these statistics are pointless. E.g. GDP per capita in Ireland is high because of a few tech comapnies - including Apple - running their non-US operations through a holding company that is treated as part of the Irisih economy. Huge profits are recognized in the Irish subsidiary (rather than in France, Australia, Japan) because the taxes payable by the (e.g.) Apple Group of comapnies is lower thatn they would be if profits (and hence contributions to GDP) were recognized in the countries where the final consumer sale occurred.   However, the impact of these profits recorded by Apple Ireland is negligible on the overall welfare of the people living in Ireland.   

I seem to recall that using a metric such as "Gross National Product per capita" might be better - but I suspect that measure has its own problems too.  

Share this post


Link to post
Share on other sites

Interesting that  while the actual Q2 negative number is driven by manufacturing going negative, which is understandable from stockpiling/rescheduled shutdowns, services only grew by a very small amount. Assuming that Q3 manufacturing is better as August shutdowns happened in April and there will be some stock buildup ahead of October, any negative on services which wont be helped by the current weather could give an overall negative for Q3 as the UK economy is much more services driven than manufacturing.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 316 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.