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Tin Foil Hat

Recession Coming

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The economy is not officially in recession - at least not yet.

However, the growth figures published by the Office for National Statistics underline the fact that UK Plc is heading slowly but surely towards negative territory.

The economy's 0.2pc expansion in the second quarter means the annual rate of growth has now dropped to just 1.6pc - equalling a 15-year low and coming in comfortably below Alistair Darling's forecast for economic growth this year.

The figures show that after a relatively robust first quarter, a number of important sectors slowed markedly in the three months to June.

In the latest evidence that the housing market slump is weighing on the economy, the construction sector's output fell by 0.7pc on the previous quarter - the largest fall for almost three years.

Meanwhile, growth in consumer spending, which has been the engine for UK growth for most of the past decade, slowed appreciably - though the precise data on this will not be available until next month.

However, the fact is that the real economic trauma in the economy - the record drop in house prices, the sudden plunge in retail sales; the dive in services and manufacturing sector activity - only occured at the very end of the second quarter, so would not have tainted these figures too much anyway.

However, this implies that there is a significant chance that growth drops into negative territory in the third quarter.

The economic textbooks say that a recession is technically defined as two successive quarters of contraction, so, this would leave the UK one step away from its first technical recession since the early 1990s.

Such a suspicion is confirmed by the ONS numbers, although there were a few surprises. Most notably, the services sector, which accounts for around three quarters of UK economic growth, expanded slightly faster than in the first quarter.

However, a closer look shows that this was largely thanks to a surge in transport and communication - perhaps in part due to higher petrol prices boosting profits.

The National Institute for Economic and Social Research said in its latest quarterly report that Britain faces three years of anaemic economic growth, though it will avoid a recession.

I happen to believe that it is too optimistic. With UK consumers and companies more indebted than any of their counterparts overseas the scale of the economic slowdown facing us will be significant.

Don't forget that only a few months ago a variety of economists (and the Council of Mortgage Lenders comes to mind here) were confidently predicting that house prices would not fall this year.

They could not have been more completely, utterly wrong. Economists find it hard to forecast recessions.

That doesn't change the fact that the r-word is now the most likely outcome for the UK economy.

Lots of interesting comments at the bottom. I think the sheeple are waking up now to their new world of poop.


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  • 399 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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