Tuesday, December 21, 2010
Are we still in recession
Are GDP figures being generated by the ONS reflective of what is going on in the economy. While we sit 4.5% below GDP peak, recent GDP growth (driven by stimulus and deficit spending) is being regarded by the main stream as self sustaining. This seems unlikely where we remain in a (household) balance sheet recession. Little has really changed since 2008/9 and matters are possibly worse. The consumer remains compromised by (a) patchy employment prospects - see recent stats (b) wage compression esp relative to the cost of imported items (esp commodities) (c) declining house prices looking set to accelerate and (d) a reduced capacity and appetite for credit. Certainly tax revenues relative to GDP dropping 3 years straight suggest an economy weaker than GDP figures alone indicate.