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Uk Economy Showing Strong Growth

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From the bbc website

UK economy showing strong growth

The news could signal a further rate rise from the Bank of England

The UK economy grew at a faster than expected rate in the second quarter of 2007, increasing the chance of further interest rate rises to curb inflation.

The Office for National Statistics said gross domestic product (GDP) rose by 0.8% in the three months to June.

That was its sixth consecutive quarter of above-average growth, ahead of analysts' predictions of 0.7%.

Annual growth came in at 3.0%, ahead of the 2.9% forecast. The data led to sterling rising against the dollar.

'In a pickle'

Analyst Gavin Redknap at Standard Chartered said: "The result means that for the sixth straight quarter the UK economy has been growing at or above trend - raising further questions as to the extent of spare capacity in the economy.

It would be no surprise that the Bank is straining on the leash for another quick hike in rates

David Brown, analyst Bear Stearns

"For now the data supports the contention that further hikes from the Bank of England are necessary.

"If some of the Bank's Monetary Policy Committee had their way, rates would head higher by August, though there are clearly many in the committee who are worried about monetary policy overkill."

UK interest rates now stand at 5.75%, after having been increased five times since last August as the Bank tries to rein in inflation to the government target of 2%.

Latest data showed it at 2.4% in June.

The Bank's rate policy remained "in a pickle" said David Brown of Bear Stearns, agreeing that further rate hikes were likely.

"UK growth is very strong, inflation is too high and monetary expansion is running far too fast. There is no end in sight to the current rate tightening cycle," he said.

"Since the bulk of growth comes from consumer spending, it leaves domestic demand at risk of over-heating with negative consequences for inflation. It would be no surprise that the Bank is straining on the leash for another quick hike in rates."

So it seems GDP has been measured showing excessive growth that, together with excessive increases in the money supply, would "normally" create very high inflation. But we are not in ordinary times in the UK with a number of deflationary influences keeping inflation in a very tight grip. All this means HPI is continuing albeit at a more modest pace 10% ish.

But this can and will not continue. Immigration has got to proportions that is causing acute problems not only for housing (dont miss that programme monday evening) but for the entire infastructure.

Debt, which must also grow to feed this expansion, is getting to an unsustainable level for too many. With interest rates rising by unthought of heights only a couple of years ago. It will be a slow strangulation but I would estimate that base rates at 7.5% would quarantee? a real contraction, which should be seen some time mid to late 2008.

As I have remarked before, all property price slumps have followed interest hike cycles of 3% or more and GDP falls that at some stage enter a recessionary period.

With all the factors we have to hand it would seem a very probable outcome that GDP would start to fall away dramatically by or at 1st quarter 2008. Is there any factor(s) that could stop this from happening?

If this is the case, house prices would see marked downward pressure very soon after this.

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From the bbc website

UK economy showing strong growth

The news could signal a further rate rise from the Bank of England

The UK economy grew at a faster than expected rate in the second quarter of 2007, increasing the chance of further interest rate rises to curb inflation.

The Office for National Statistics said gross domestic product (GDP) rose by 0.8% in the three months to June.

That was its sixth consecutive quarter of above-average growth, ahead of analysts' predictions of 0.7%.

Annual growth came in at 3.0%, ahead of the 2.9% forecast. The data led to sterling rising against the dollar.

'In a pickle'

Analyst Gavin Redknap at Standard Chartered said: "The result means that for the sixth straight quarter the UK economy has been growing at or above trend - raising further questions as to the extent of spare capacity in the economy.

It would be no surprise that the Bank is straining on the leash for another quick hike in rates

David Brown, analyst Bear Stearns

"For now the data supports the contention that further hikes from the Bank of England are necessary.

"If some of the Bank's Monetary Policy Committee had their way, rates would head higher by August, though there are clearly many in the committee who are worried about monetary policy overkill."

UK interest rates now stand at 5.75%, after having been increased five times since last August as the Bank tries to rein in inflation to the government target of 2%.

Latest data showed it at 2.4% in June.

The Bank's rate policy remained "in a pickle" said David Brown of Bear Stearns, agreeing that further rate hikes were likely.

"UK growth is very strong, inflation is too high and monetary expansion is running far too fast. There is no end in sight to the current rate tightening cycle," he said.

"Since the bulk of growth comes from consumer spending, it leaves domestic demand at risk of over-heating with negative consequences for inflation. It would be no surprise that the Bank is straining on the leash for another quick hike in rates."

So it seems GDP has been measured showing excessive growth that, together with excessive increases in the money supply, would "normally" create very high inflation. But we are not in ordinary times in the UK with a number of deflationary influences keeping inflation in a very tight grip. All this means HPI is continuing albeit at a more modest pace 10% ish.

But this can and will not continue. Immigration has got to proportions that is causing acute problems not only for housing (dont miss that programme monday evening) but for the entire infastructure.

Debt, which must also grow to feed this expansion, is getting to an unsustainable level for too many. With interest rates rising by unthought of heights only a couple of years ago. It will be a slow strangulation but I would estimate that base rates at 7.5% would quarantee? a real contraction, which should be seen some time mid to late 2008.

As I have remarked before, all property price slumps have followed interest hike cycles of 3% or more and GDP falls that at some stage enter a recessionary period.

With all the factors we have to hand it would seem a very probable outcome that GDP would start to fall away dramatically by or at 1st quarter 2008. Is there any factor(s) that could stop this from happening?

If this is the case, house prices would see marked downward pressure very soon after this.

They really are taking the p&*s when Investment Banks dare say that Monetary Expansion is running too fast. Like they are just observing it as an independant organisation :angry: . Of course the economy is going to grow when it's awash in 'money'!

AFP

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i'm surprised there aren't more comments on this - it will help push up IRs and keep sterling strong against weak currencies like the USD

Exactly. Beyond 6% IR and HPI is toast.

All these hikes, yet people keep spending and the economy keeps growing. But where did they get the money.....oh yes, they borrowed it and the debt mountain gets bigger. There seems to be no end in sight. :huh:

But when we do finally hit the buffers - it will be very messy

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From the bbc website

UK economy showing strong growth

The news could signal a further rate rise from the Bank of England

The UK economy grew at a faster than expected rate in the second quarter of 2007, increasing the chance of further interest rate rises to curb inflation.

The Office for National Statistics said gross domestic product (GDP) rose by 0.8% in the three months to June.

That was its sixth consecutive quarter of above-average growth, ahead of analysts' predictions of 0.7%.

Annual growth came in at 3.0%, ahead of the 2.9% forecast. The data led to sterling rising against the dollar.

'In a pickle'

Analyst Gavin Redknap at Standard Chartered said: "The result means that for the sixth straight quarter the UK economy has been growing at or above trend - raising further questions as to the extent of spare capacity in the economy.

It would be no surprise that the Bank is straining on the leash for another quick hike in rates

David Brown, analyst Bear Stearns

"For now the data supports the contention that further hikes from the Bank of England are necessary.

"If some of the Bank's Monetary Policy Committee had their way, rates would head higher by August, though there are clearly many in the committee who are worried about monetary policy overkill."

UK interest rates now stand at 5.75%, after having been increased five times since last August as the Bank tries to rein in inflation to the government target of 2%.

Latest data showed it at 2.4% in June.

The Bank's rate policy remained "in a pickle" said David Brown of Bear Stearns, agreeing that further rate hikes were likely.

"UK growth is very strong, inflation is too high and monetary expansion is running far too fast. There is no end in sight to the current rate tightening cycle," he said.

"Since the bulk of growth comes from consumer spending, it leaves domestic demand at risk of over-heating with negative consequences for inflation. It would be no surprise that the Bank is straining on the leash for another quick hike in rates."

So it seems GDP has been measured showing excessive growth that, together with excessive increases in the money supply, would "normally" create very high inflation. But we are not in ordinary times in the UK with a number of deflationary influences keeping inflation in a very tight grip. All this means HPI is continuing albeit at a more modest pace 10% ish.

But this can and will not continue. Immigration has got to proportions that is causing acute problems not only for housing (dont miss that programme monday evening) but for the entire infastructure.

Debt, which must also grow to feed this expansion, is getting to an unsustainable level for too many. With interest rates rising by unthought of heights only a couple of years ago. It will be a slow strangulation but I would estimate that base rates at 7.5% would quarantee? a real contraction, which should be seen some time mid to late 2008.

As I have remarked before, all property price slumps have followed interest hike cycles of 3% or more and GDP falls that at some stage enter a recessionary period.

With all the factors we have to hand it would seem a very probable outcome that GDP would start to fall away dramatically by or at 1st quarter 2008. Is there any factor(s) that could stop this from happening?

If this is the case, house prices would see marked downward pressure very soon after this.

Lets have a look at the Bearish outlook on the economy:

If GDP slowed, it would be a cast iron reflection of how peak oil was ruining western economies, UK manufacturing had reduced to zero, the knowledge economy was a myth and broadly the bears would say the game is up. Welcome to massive unemployment, a benefits system that cannot be sustained and an era of "gruel Britannia".

When GDP increases, manufacturing is reported as being in good shape, exports of services strong, unemployment dropping, credit card debt reducing etc etc - all this is taken as the prelude to wild inflation that will require 15% interest rates to calm it.

In either scenario a HPC is inevitable.

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Lets have a look at the Bearish outlook on the economy:

If GDP slowed, it would be a cast iron reflection of how peak oil was ruining western economies, UK manufacturing had reduced to zero, the knowledge economy was a myth and broadly the bears would say the game is up. Welcome to massive unemployment, a benefits system that cannot be sustained and an era of "gruel Britannia".

When GDP increases, manufacturing is reported as being in good shape, exports of services strong, unemployment dropping, credit card debt reducing etc etc - all this is taken as the prelude to wild inflation that will require 15% interest rates to calm it.

In either scenario a HPC is inevitable.

good post :rolleyes:

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Inflation is so low and under control one local supplier (who I not so long ago reported raising prices across the board by 12%) has now told all their customers that they will not have a price list at all that they will work to.

One man's growth is another man's inflation.

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I think everyone is missing the point. Forget about the beebs comments and analysis but just ask why?

The last couple of paragraphs give a clue;

"UK growth is very strong, inflation is too high and monetary expansion is running far too fast. There is no end in sight to the current rate tightening cycle," he said.

"Since the bulk of growth comes from consumer spending, it leaves domestic demand at risk of over-heating with negative consequences for inflation. It would be no surprise that the Bank is straining on the leash for another quick hike in rates."

The key points being that this recent growth is down primarily to consumer spending and, as we all know, this is down to higher borrowing. This coupled with the fact money supply is out of control means a correction in this growth is imminent. Growth can simply not go on for these reasons. With ongoing credit tightening, lower available disposable incomes together with a worsening situation in the public purse which is being exasperated by global events a reverse in GDP must be seen and very soon.

When a sharp downturn in GDP is seen house price deductions wont be far behind.

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The economy isn't growing its debt that's growing. Shut off the credit and see how fast it grows.

I cant read the words Bear Stearns without laffin' :rolleyes:

Well done that man,

The UK growth works like this, you give me £1,000,00 and I go out and buy a shed, the £1,000,000 pounds is then put into a hole in the ground and forgotten about, you then get £10 commission for selling me the £1,000,000, that £10 then gets added to your profit and we have smiling faces all round, this is the new world order.

In the olden days it worked like this, you gave me £10 for painting your shed and I in return cut your grass for £10.

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Well done that man,

The UK growth works like this, you give me £1,000,00 and I go out and buy a shed, the £1,000,000 pounds is then put into a hole in the ground and forgotten about, you then get £10 commission for selling me the £1,000,000, that £10 then gets added to your profit and we have smiling faces all round, this is the new world order.

In the olden days it worked like this, you gave me £10 for painting your shed and I in return cut your grass for £10.

Drives me nuts when they go on about how strong the U.K. economy is. Recycle Chinese plastics , eat pizza and spew out numbers is all we so now. My father worked in British industry all his life till his retirement, he'd probably be in a call centre today.

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Fts comments today,''The two main data releases of the week came as something of a contrast to the minutes from the BOE''

In other words what were the f**king chimps on the MPC thinking of when voting 6-3 when core inflation is at a 10 year high and GDP is spiralling out of control on the back of an out of control money supply.

Serious questions now arise as to what Lomax and Blanchflower are trying to do.

Edited by crashmonitor

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