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I anticipated a slowdown to 0.5%. Worse than I expected, but then again I came up with the higher figure long befopre things got so bad!

IMO, we are on target for negative growth in the 3rd Q.

That all said, I suspect the ONS may be erring on the side of caution.

All good news for sterling though, up vs. the Euro and the $.

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I anticipated a slowdown to 0.5%. Worse than I expected, but then again I came up with the higher figure long befopre things got so bad!

IMO, we are on target for negative growth in the 3rd Q.

That all said, I suspect the ONS may be erring on the side of caution.

All good news for sterling though, up vs. the Euro and the $.

Why would sterling strengthen ( good news as I am off on holiday tommorow ) on news that the economy is grinding to a halt and in truth is probably already in recession ?

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GDP is an insidious, abstract concept. Utterly meaningless, unless of course you are an economist or bat shit insane, usually both!

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Why would sterling strengthen ( good news as I am off on holiday tommorow ) on news that the economy is grinding to a halt and in truth is probably already in recession ?

Same logic behind the recent big rises in builder stocks. In an unwinding miracle economy good news is bad and bad news is good. I can recall the pre-dotcom bust days. If a company annouced huge losses the stock price would fly. As of this moment the FTSE is in sharp rfeversal and headed up. Slowing economy good for busines and share prices it seems.

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IMO, we are on target for negative growth in the 3rd Q.

I agree, but I'm not sure it'll ever be official.

Major ONS revisions to the calculation of GDP are scheduled for September, and these are forecast to give the UK a big uplift. No matter how bad things are in reality, don't be surprised to find Brown and Darling crowing how well the economy is doing despite the credit crunch, and how New Labour's policies over the past decade have left the UK far less vulnerable to a global economic downturn.

Get your spin deflectors ready...

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The Labour MP on the BBC by-election coverage was going on about the 63 quarters of consecutive growth under Labour (now 64).

It's not really true. How much of that figure is real growth, adding to the economy (factors of production, adding real value); how much of it has been the Gordon miracle of deception and illusion (MEWing, I-haven't-got-the-money-so-I'll-spend-it debt is wealth approach...)

I do wish commentators would take the government to task on the lies and spin - they are finished. Which side do the commentators want to be on?

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Why would sterling strengthen ( good news as I am off on holiday tommorow ) on news that the economy is grinding to a halt and in truth is probably already in recession ?

There are a few reasons:

1) The GDP data was in line with expectations so should have little negative impact as it was already priced into the market.

2) Technicals. Sterling defended a technical price barrier at 1.9810 against the dollar on Thursday and had bounced handsomely off that to stand at 1.9880 before the data was released. 1.99 was previously a technical barrier on the downside, so once sterling managed to break above 1.99, it was going to sprint higher. On technical charts, GBP/USD is currently bullish or in an uptrend, so it is being bought on all dips. This will only change if GBP/USD ducks below 1.9810.

3) Sterling is benefiting from a temporary flow of international funds , which are going into sterling rather than the dollar or the euro, as uncertainty grows about the state of the US and euro economies.

4) There is a lot of concern about all major economies at present, not just the UK, so currency investors are placing bets on sterling in the very short-term because of its higher yield.

5) A hawkish statement by ECB member Liebscher this morning helped the euro to rally against the dollar. Sterling jumped on the euro's bandwagon.

6) The hawkish bias of the Bank of England minutes on Wednesday was a surprise and its significance is still reverberating across currency markets and many are betting the next move in interest rates will be up, and it may come as soon as August. This boosts sterling in the short-term.

7) Sterling has grown immune to negative economic data, in much the same way as the euro. Markets are too focused on the US and seem prepared for now to ignore the problems in the UK and in euroland. The worm will turn eventually and sterling and the euro will be made to pay for a stockpile of poor economic releases, at a time of the market's choosing.

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6) The hawkish bias of the Bank of England minutes on Wednesday was a surprise and its significance is still reverberating across currency markets and many are betting the next move in interest rates will be up, and it may come as soon as August. This boosts sterling in the short-term.

Is this your opinion too? I read those minutes and interpreted from it that the BoE were reacting to events, had gone all hawkish on the basis of the high oil price and not-so-bad June retail sales data, and will reverse their stance over the next few wks.

I guess my opinion may be completely out of step with the market

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Do you think the UK could enter a new lower trend rate?

A lower trend rate of growth?

Of course! The historical average trend rate had been around 3.0% per annum. We are now at 2.3% for Qtr 1 and 1.6% for Qtr 2 with worse to follow in the coming quarters.

I also do not believe the ONS figures. They claim a rise of 0.6% in Qtr 2 retail consumption over Qtr 1, but most business surveys and reports from actual retailers don't substantiate that, i.e. it was a lot worse in Qtr 2.

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A lower trend rate of growth?

Of course! The historical average trend rate had been around 3.0% per annum. We are now at 2.3% for Qtr 1 and 1.6% for Qtr 2 with worse to follow in the coming quarters.

I also do not believe the ONS figures. They claim a rise of 0.6% in Qtr 2 retail consumption over Qtr 1, but most business surveys and reports from actual retailers don't substantiate that, i.e. it was a lot worse in Qtr 2.

I was surprised how quickly they have had to raise public borrowing and abandon the 'golden rule'.

I understand the BOE calculate their own GDP figures. Not sure if they go into their fan charts.

Edited by Ash4781

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GDP is an insidious, abstract concept. Utterly meaningless, unless of course you are an economist or bat shit insane, usually both!

I'm also suspicious about GDP - especially how it is used as a metric for acceptable government debt... and how it can be trivially inflated by superfluous transactions that do not add value.

Can you explain in any more detail why you object to it? I'd be interested to refine my own view.

I'm particularly amused/concerned that the ONS plans to adjust the calculation of GDP this autumn to "better account" for the profits in financial services. I wonder if they will - or if they now see that the only likely consequence would be to make the GDP number plummet faster than it would otherwise. To me, it seems that financial services revenues are already double-counting economically productive activity.

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I'm also suspicious about GDP - especially how it is used as a metric for acceptable government debt... and how it can be trivially inflated by superfluous transactions that do not add value.

Can you explain in any more detail why you object to it? I'd be interested to refine my own view.

I'm particularly amused/concerned that the ONS plans to adjust the calculation of GDP this autumn to "better account" for the profits in financial services. I wonder if they will - or if they now see that the only likely consequence would be to make the GDP number plummet faster than it would otherwise. To me, it seems that financial services revenues are already double-counting economically productive activity.

It's basically a measure of personal debt. It is not a measure of the personal wellbeing of the nation, how happy and content we are. It is an arrogant, pompous measure of consumer indebtedness and the monumental practical joke that is the debt based system of money supply. It's a measure of activity, good or bad, and deserves no more than incredulity.

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Is this your opinion too? I read those minutes and interpreted from it that the BoE were reacting to events, had gone all hawkish on the basis of the high oil price and not-so-bad June retail sales data, and will reverse their stance over the next few wks.

I guess my opinion may be completely out of step with the market

I thought they were incredibly biased. The reality is that it could be a disastrous error to raise rates and this will play on the minds of some members over the next fortnight. They clearly sent a signal though that their bias lay with tightening policy and intended to keep their options open, so that if they do raise rates next month, they can claim to have warned the markets. I don't trust them at all as there is no clear conviction in their deliberations.

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It's basically a measure of personal debt. It is not a measure of the personal wellbeing of the nation, how happy and content we are. It is an arrogant, pompous measure of consumer indebtedness and the monumental practical joke that is the debt based system of money supply. It's a measure of activity, good or bad, and deserves no more than incredulity.

Many of your ideas mirror my own on this subject. What surprises me, given that we do not seem to be alone in thinking this way, is that I'm not aware of any book that analyses the nature of GDP. Given that it constrains a significant portion of our monetary system, it seems to be a fundamental issue that everyone should understand... not just a handful of HPC nerds who've spent sleepless nights trying to fathom out what is happening.

Is there a book that analyses the composition of GDP and consequences of growth/contraction?

Edited by A.steve

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  • 401 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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