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UK still technically in recession

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Stephanie Flanders | 10:19 UK time, Wednesday, 25 November 2009

We may not like the fact that Britain failed to follow the rest of the G7 out of recession in the third quarter, but we're stuck with it. At least for now.

The first revision of that "shocking" first estimate for GDP is in the right direction, but it doesn't change the fact that the UK is still technically in recession. And to judge by the robust defence of its numbers also produced today by the ONS [64KB PDF], our official statistical agency doesn't expect later revisions to change the picture substantially.

They now believe that the service sector and manufacturing did a little better than first thought, whereas the production industries fared a little worse. But these are modest changes.

Many more forward-looking surveys and leading indicators - national and international - paint a brighter picture of the UK economy today. But with the possible exception of the labour market data, that broad-based improvement is still not showing itself in the data collected by the ONS.

Comments

  • Comment number 1.

    UK still technically in recession?

    Why not write the UK still in recession, there's nothing technical about it. It was it is.

  • Comment number 2.

    Wow, the economy is still tanking despite various fiscal stimulus measures. AMAZING!

    Just wait for next year when VAT goes up and scrappage scheme ends.

  • Comment number 3.

    sittin on my butt eatin.

  • Comment number 4.

    merv's speech laid it all out yesterday [see parliament tv]. nothing going happen for ages.

    the only people frantically trying to whisk water into a thick cream' are those with an election?

  • Comment number 5.


    "The first revision of that "shocking" first estimate for GDP is in the right direction"

    I would like to point out that the US first estimate was in the 'wrong direction' - i.e. worse than published - as I said at the time.

    Proving once again that you cannot lie your way out of recession.

    Never mind all this stuff we already know WHAT ABOUT THE BANK CHARGES STEPHANIE?

    How many times will the public get screwed over this year?

    Technically the UK is doomed - a fact compounded by the 'probably' new chancellor being unable to do simple maths for his expenses. I worrying sign for someone who could be making crucial decisions for the country in 6 months time with an emergency budget.

    Just watch the debt clock....it says more than words ever can...
    http://cluaran.free.fr/debt.html

  • Comment number 6.

    'UK still technically in recession'

    Steph,

    Did Mandy brief that one to you?

    You may as well as headlined it...The 'green shoots' will appear by Xmas!

    OR

    Happy days are (nearly) here again!

  • Comment number 7.

    Stephanie:

    I commend the way in which you try to see the silver lining behind each economic cloud, but in the current UK situation this simply doesn't convince. The US is out of recession. The core Eurozone countries are out of recession. The UK is being left behind. And can I remind you that Mr Brown said that Britain was "best placed" to weather an economic downturn?

    The UK recession is structural. We relied too much on financial services. The government spends too much, and is now monetizing debt, thereby building in both exchange rate and inflationary risk. Business is being strangled by bureaucracy.

    It's time to face the fact that this economic model - 'building a new welfare state on the tax revenue from financial services' - isn't working.

  • Comment number 8.

    #60 from SF's previous blog writingsonthewall wrote:
    The banks, the Government, The justice system have all just

    DECLARED WAR ON THE CONSUMER!

    http://news.bbc.co.uk/1/hi/business/8376906.stm

    No appeal to the Eurpopean court of human rights allowed?

    This is totalitarianism in the making - this would disgust the justice system in Zimbabwe.

    Forget this pointless blog - the rights of all consumers have just been railroaded by corporate greed and near criminality.

    -----------------------------------------------

    It would appear that jadedjean was right all along re free market, liberal democratic anarchy.

    If he/she had not been censored just for saying how it really is...he/she would be on here saying...'I told you so'.

    THE ANARCHISTS/OLIGARCHS HAVE THE ENTIRE ESTABLIHMENT IN THEIR POCKETS!

    ...so long suckers!

  • Comment number 9.

    Whilst I understand why people are holding their breath for crumbs of good news on 0.1% growth here or there, Mervyn King yesterday made the point forcibly that you need to look at the deep fall in total output ( peak/trough) which could be lost permanently. He reckons this is the big picture rather than looking at rates of growth.He couldnt say what size of spare capacity would be taken up before real growth materialises. Lord Myners glibly says that Mr King is paid to be cautious. I see sincerity in Mr King's analysis.

  • Comment number 10.

    Mervyn King was correct to say that it doesn't matter about fractions of a percent change up or down in GDP quarterly GDP growth as it is the amount of spare capacity that really matters in monetary policy making.
    Of course nobody knows exactly how much slack there is - but it must be a lot because £175 billion of QE injections has not disturbed the UK Government Bond interest premium over the dollar & German bonds. That slack in productive capacity is still anchoring our inflation expectations at v low levels - which is quite different from most previous recessions where an inflationary boom was usually predicted.
    That was because we had to pay much much higher rates of interest in the past that reflected the much higher levels of inflation we don't have nowadays.
    The Key point is that neither unemployment nor home re-possessions nor bankruptcies are consistent with the dire warnings issued by the IMF earlier this year. They're all very much lower than we were told they'd be.
    So maybe the dire predictions of Major Banks' actuaries are also unfounded too? If they were, much of their notional write-offs will soon need to be written back into their profit line and Corporation taxes paid on those real profits?
    That's important because it's the massive fall in tax collections from Banks that's caused the deficit this year, and maybe next. Getting Banks back to making profits and paying normal levels of Corporation Taxes is the main way to reduce the so-called deficit!
    Which is why the QE programme is so important: it's the BoE that now owns almost all of that extra debt. So HM Treasury is paying interest on the extra debt to the the BoE. Which then pays it back to HM Treasury because it's an wholly owned subsidiary of our Nation.
    It'll be really interesting to learn how those Billions of Government Bonds will be re-paid to the BoE by the HM Treasury that also owns the BoE. I think we should be told - don't you?

  • Comment number 11.

    6. At 11:45am on 25 Nov 2009, BankSlickerminustheR

    ....how about these....

    "The slowdown is slowing to a slower pace"

    "The rapid decline in output is declining at a slower rate"

    "The green shoots have been there but only the 'experts' can see them"

    "The country should be pleased we now have a stable financial system"

    "The recovery has begun, but it's so slow no-one will notice it"

    The lies being told are pointless and in fact self destructive as they only serve to fuel the anger of the already frustrated population. It's funny how the media are not being brought up on the number of incorrect and inaccurate statements they have been making about the Economy on behalf of the Government - the PPC seem to have suspended rules on telling the truth whilst we are in crisis.

    I cannot wait for the next growth figures to come out, I suspect they will show a slight growth in the Economy (well it should do after the additional £200bn pumped in by the BoE) - and then watch the media flock around the 'signs of technical recovery' before the following quarter they talk of 'double dip' and try to play the lie that we were out of recession and bad luck has taken us 'back in'.

    Absolute rubbish - there is no such thing as a 'double dip' the recession merely reaches a growth peak after all the stimuli, the growth IS NOT REAL, it is like paying yourself from your savings and then claiming you have had a 'pay rise'.

  • Comment number 12.

    "But with the possible exception of the labour market data, that broad-based improvement is still not showing itself in the data collected by the ONS."

    We need *real* growth.

    It's still not showing itself because it's still not there.

    The government has not helped to deliver any real growth. £200,000,000,000 created out of thin air by the Bank of England to support government spending is not real growth.

    Even if it does eventually show itself in the ONS figures it still won't be real growth from a healthily functioning economy.

    And as for a broad-based improvement in labour market data... Ask the 30,000 people who lost their jobs last month, and the 2,400,000-odd unemployed people they joined, what positive labour market data there is. That people are still losing their jobs, but just not as quickly?

  • Comment number 13.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 14.

    12. At 12:13pm on 25 Nov 2009, plb_plb wrote:

    And as for a broad-based improvement in labour market data... Ask the 30,000 people who lost their jobs last month, and the 2,400,000-odd unemployed people they joined, what positive labour market data there is. That people are still losing their jobs, but just not as quickly?
    -------------
    There are also a lot of us who don't appear as 'unemployed', at least until our small companies go to the wall. At present my company has had no work for 3 months, my timetable is that my company shuts up shop in January if I've still no work.

  • Comment number 15.

    7. At 11:55am on 25 Nov 2009, Friendlycard

    I would err caution at the signs that the US and Eurozone are 'out of recovery'.

    If you have a job which nets you a £30k a year income, after all your costs - lets say your household spare cash is £13000 a year.

    Then you loose your job (credit crunch), as a result you are loosing £17k annually (recession) - so you use your savings to boost your current account to the tune of 18k - to tide you over until you start working again.

    ...it appears that your income (your GDP) has risen by 38% (approx) - that's what the statistics will say - however common sense tells us different.

    This is what it means to be 'technically out of recession' - the only difference is these countries are not using savings, but have visited a loan shark to borrow the additional 18k.

    All the countries reporting to be 'out of recession' have done exactly this - they hope that they will 'start working again' before the money runs out.

    In any field other than Economics this would be labelled a silly idea - in Economics it's "saving the world".

  • Comment number 16.

    Do you think that if the Uk actually owned any of the businesses based here we may have a chance of seeing some growth??

    The cash that we make simply disappears into its parent economy. We have sold out.

  • Comment number 17.

    10. At 12:05pm on 25 Nov 2009, leftie

    You make a very pertinent point, we're lending ourselves the money and charging ourselves interest.

    A bank manager (when they used to exist) once advised me that having money outstanding on your credit cards whilst there are savings in the bank is effectively 'borrowing against yourself' - and he advised against it.

    ...it seems that simple advice from the high street bank manager has not been heeded by the experts who run the whole system.

    I do think people are slowly starting to realise how bad things must be - as you fight your way through the 'fog of lies' you eventually see that the truth is we are going to be in recession for a very long time - technically we may come out for periods, but the overproduction must be resolved with capital destruction - it's simple and true.

    On a personal level many folks can see they would never manage their own budgets in the way the Government is doing (unless they were absolutely desperate) - which sets the alarm bells ringing.

  • Comment number 18.

    Sounds like you are laying the groundwork for changing the inputs to make the GDP output more appealing to the Government. If we had joined the +GDP club last quarter we would argue the data was still incorrect. We need to get our energies focused on real change, maybe we should be canvasing for some of the climate change handouts in Copenhagen because believe me we are as poor as some of the countries who are claiming it. If we don't get a handle on the Climate debate the 60 billion given to the banks will look like small change to what we will be faced with.

  • Comment number 19.

    #7 "The UK recession is structural."
    Absolutely. The key is the massive amount of private sector debt that was accumulated over the last thirty years. Wheareas Norway and others invested oil revenues in sovereign wealth funds, we squandered ours on paying people NOT to work (so as to "drive wages down") and also on giveaways such as privatisation and the selling off of Council Houses, both of which placed "windfalls" in the hands of small investors, who with no intention of investing sold them on to finance their lifestyles. Once these windfalls were spent then consumers kept on living beyond their means by easy access to credit, secured against house and other asset prices which was why the Government got locked into such a destructive asset bubble. Meanwhile the balance of payments (never mind the balance of trade) carried on heading south financed by periodically selling off assets (houses, land, shares) abroad, often to those same sovereign wealth funds we decided not to have. (Footnote: when Tony Benn wanted to set up a sovereign wealth fund for UK oil revenues in the seventies he was derided.)

    Once the bubble burst there was no security for the credit taken out, except future earnings. Despite the efforts of the government to shift billions in debt from the private sector to future taxpayers, there is still a massive overhang. In fact as a nation we had spent on average a whole years earnings more than we had earned. Households and businesses are now frantically paying this down, which is why the economy is so flat despite £200bn in stimulus. Until people are happy that their debt is manageable against future earnings they will not spend. (I know, I'm one of them.)

    In the meantime we have limited prospect for future earnings because our education system turns out either people who can write a thousand words of waffle on anything under the sun, or unskilled, embittered kids only fit for McJobs. Sheer class hatred means that we have not invested in developing skilled manufacturing, technical and design jobs like our competitors. As a result we simply lack the means to earn our way out of this recession. (Export-led growth anyone?)

    With little capacity, but huge need, to pay down the debt incurred by living beyond our means in the past. This recession will be with us for a very long time indeed.

  • Comment number 20.

    15. writingsonthewall:

    Yes, I agree. One of my favourite commentators on this has warned of a "statistical recovery" - the numbers look better but do not actually reflect the reality. So yes, we do need to be cautious, especially where Eurozone 'recovery' is concerned.

    On this subject, there are serious problems at the 'periphery' of the Eurozone. Greece is in a dreadful mess, and, where Spain is concerned, a lot of problems have been 'hidden under the carpet', I suspect, through not marking-to-market (the reported modest fall in average Spanish property prices looks completely counter-intuitive). Spanish unemployment (almost 20%, and almost 40% for under-25s) is frightening, and not getting any better. Italy doesn't look good either, and much the same can be said of several eastern EZ members.

    I still maintain, however, that the UK is underperforming economies hitherto considered comparable, including Germany, France and the US. GDP comparisons are difficult across different currencies. Even if UK GDP performed 'strongly' (as reported in sterling), the international value of UK economic output would still be very much lower than it was two years ago, because of the slump in the purchasing power of sterling.

    If you go to Eurozone holiday destinations hitherto popular with British visitors, you will see sharp downturns in business because of the comparative poverty (in euros) of British tourists. In Europe, Brits are often seen as 'the new poor'. A weaker exchange rate obviously benefits exporters, but can only do so if you have an adequate exporting base which, I would argue, is no longer the case here. On the other hand, imports obviously cost more, a big problem now that we have swung from energy surplus to energy deficiency.

    Taking rising import costs (via weak sterling) and QE into account, the medium-term outlook seems to me an inflationary one. Government therefore needs to reassure international markets that the deficit is under control. Markets know that an election is due, so do not realistically expect action on the deficit before next June. After that, though, some form of action will be imperative.



  • Comment number 21.

    19. Co-operateordie:

    A very perceptive assessment. The comparison with Norway is interesting. Norway puts its oil revenues into a fund for the future (NPF-G), whereas we squandered the lot on current spending. Much the same is true of asset sales proceeds. Where council house sales are concerned, I'm in favour of giving people the option of home ownership, but believed very strongly, all along, that the proceeds should have been invested in new housing. Similarly, our public sector pension obligation is not funded, but is paid for out of current taxation. This stores up problems for the future (and, incidentally, means that reported government debt is a huge understatement of true liabilities - if government obligations were marked-to-market, our national debt figure would be frightening).

    Now some would argue - rightly - that Norway is a very different country, with a much bigger resource-per-capita equation. But what worries me is the attitude that we take - irrespective of which party is in power, we seem to want current consumption at the expense of longer-term prudence.

    I don't particularly blame politicians for this - their short-termism will continue, unless or until we get a cultural change away from our 'want it now, don't want to save for the future' mentality.

  • Comment number 22.

    What broad-based improvement?

    Is that what we used to call Christmas shopping?

    Look: the government has sploshed GBP 1.3 trillion of taxpayer funds into the banking sector whilst running up a fiscal deficit of GBP 200 billion and Merv has run off another GBP 200 billion on his printing set.

    Given all that boodle out there funded by the taxpayer things ought to be looking a bit more cheerful than otherwise but we remain in recession. Christmas spending might raise the bar into growth but it will not be self-sustaining growth. So lets not delude ourselves! We are in deep and there seems to be no way out at present.

    The truth is that the real economy remains firmly on its back. All the rest is just statistics.

  • Comment number 23.

    14. DevilsAdvocate

    Sorry to hear that.


  • Comment number 24.

    This year Quantitative Easing programme has resulted in £7,000 being printed for every UK tax payer. The money has basically been lent it to the government in order that it can pay its bills.

    The UK's budget deficit will be close to £200 billion. The goverment has recently announced its "fiscal responsibility bill" aiming to cut this in half. That's a cut of about £100 billion in spending.

    So how could a cut of £100 billion be achieved?

    Closing down all the schools and universities would do it. £110 billion saved.

    Or closing down all health care would do it. £110 billion saved.

    Stopping all welfare spending would not quite do it - that's £96 billion.

    The UK government's total spending this year will be £638 billion. A cut of £100 billion is a 16% cut in public spending. That's going to be very, very painful.

    Funnily enough the government, while announcing a "fiscal responsibility bill" has spending projections showing even greater public spending in 2010 and 2011 than in 2009. Other than a 20 pence in the pound tax rise, there's no obvious place for this money to come from. More money for the BOE to print?

    Although, as you say Stephanie, "Many more forward-looking surveys and leading indicators - national and international - paint a brighter picture of the UK economy today", the big picture of the UK's economic prospects is alarming.

    UK Public Spending Figures

    John Maynard Keynes said, "markets can remain irrational far longer than you or I can remain solvent."

    Were he alive today, he might have added, "and governments and central banks can remain irrational far longer than economies can remain solvent."

  • Comment number 25.

    jadedjean for president !!!!!!
    jadedjean for president !!!!!!
    jadedjean for president !!!!!!
    jadedjean for president !!!!!!
    jadedjean for president !!!!!!
    jadedjean for president !!!!!!
    :-)

 

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