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Lessons from the latest growth figures

Stephanie Flanders | 12:05 UK time, Tuesday, 25 January 2011

Once again, the consensus has been consigned to the dustbin. We knew that the growth rate in last quarter of 2010 would be harder than usual to get right: as it turned out, none of the leading City economists even came close. The lowest forecast was growth of 0.2% - instead the first estimate is for a contraction of 0.5%.

As Joe Grice, the chief economist at the ONS points out, this figure needs to be treated with even more caution than usual - thanks to the weather. He reckons that, without the bad weather, we'd be looking at a figure of 0.0%: no contraction, but no growth either. But even that calculation must surely come with a lot of health warnings attached.

As I noted at the time, the fact that the bad snow came so close to Christmas meant there was a quite a strong possibility that the short-term loss in sales on the High Street - and online - would not be recouped. If you don't buy a Christmas present before December 25th, there's a fairly good chance you won't buy it at all.

What are the broad lessons of these figures?

One is that the "two speed recovery" is even more pronounced than we thought. Output in the production industries increased 0.9% in the fourth quarter - leaving output in this part of the economy 3.6% up on the year. Output in the service sector, by contrast, fell by 0.5%. The ONS estimates that most of the impact of the snow was to services; without the snow, services output would have been 0.1% lower - in other words, broadly flat.

Long-term, it is good news that manufacturing and the like are strengthening, relative to the service sector. It is also, incidentally, good news that the pound has fallen in response to today's figures. The recent rise in sterling, on the expectation of rate rises, has not been welcome at all. But, you can definitely have too much of a good thing, too quickly. Services still account for the lion's share of Britain's economic activity, and this recovery won't get far without them.

The second is that everyone - and it has been nearly everyone - is right to worry about where Britain's growth is going to come from in 2011, especially now that higher than expected inflation has a dealt a further blow to household budgets. As I mentioned in my last post, real household income in the UK at the end of 2010 was lower than it was 5 years ago. And there will now be further hits in 2011 from rising prices, higher VAT and real pay cuts and job losses and in the public sector.

Usually, we would expect a strong bounceback in the first three months of 2011, just as the economy bounced back after the bad weather in the first quarter of 2010. But that assumes that households hold on to their spending plans, despite all the bad news on VAT and prices. You have to wonder whether they will instead seek to cut back.

Finally, we are reminded, not for the first time, that these quarterly figures can and will bounce about a lot in the early months of the recovery. Just as it would have been foolish to break out the champagne after that surprising 1.1% growth figure for the second quarter of last year - no-one should be writing any obituaries for Britain's recovery on the back of today's news. But Mr Osborne has said they are very disappointing - and that they certainly are.

Update 1217:The opposing camps at Westminster have naturally rushed to offer their take on today's figures. Ed Balls, for one, can't resist pointing out that the quarterly growth had slowed sharply since Labour left office. But he can't seem to decide whether these figures are the government's fault.

Initially, it seems that they are not to blame. The statement put out by the shadow chancellor's office says that the fourth quarter figures "are all the more worrying because they cover the period before the government's VAT rise and sharp public spending cuts have even begun". That seems right: the construction sector may have been affected by the sharp slowdown in public investment, but overall, the coalition's modest additional spending cuts for 2010-11 will not have had a large impact on these numbers (indeed, we had that surge in public spending in November).

But, later, Mr Balls asserts that "now we are seeing the first signs of what the Conservative-led government's decisions are having on the economy". He does not seem to be able to decide whether the economy is weak as a result of the coalition's decisions, or in anticipation of them.

Sources close to Mr Osborne naturally wish to stress the provisional nature of the figures, and the impact of the weather. More interestingly, perhaps, they say we should be encouraged by what's been happening to the the claimant count, and to tax receipts. According to the Treasury, each of those has provided useful early warning, in the past, that something was going seriously wrong with the economy.

The claimant count actually fell very slightly in December, and tax receipts throughout the quarter came in almost exactly in line with the official forecasts - which, in turn, were based on the OBR's forecast of modest growth. That is not something you often observe in a shrinking economy.

There's been some support for this assessment from independent commentators - though remember they are the ones trying to explain why their forecasts were so wrong.

This is what Nida Ali, economic adviser to the Ernst & Young ITEM Club, had to say about today's public finance figures:

"Tax receipts seem to be growing nicely and it's interesting to see that VAT receipts were up almost 9% on last December. Though part of this reflects the higher VAT rate (17.5% against 15%), it also suggests greater consumer activity in December than other sources have reported."

Comments

Page 1 of 4

  • Comment number 1.

    Two weeks of snow isn't going to have that much effect on a whole quarters growth...Blaming the weather simply isn't good enough.

  • Comment number 2.

    Lessons?

    It's too late for lessons - the lessons were all in the 1930's!!! It's just that the media, Government and Economists 'chose' to ignore them.

    Whilst comparing the growth of manufacturing to the contraction of the service sector - it would be a good idea to explain what contribution these areas make overall Stephanie - I mean you wouldn't want to mislead everytone would you now?

    If your service sector contracts by 0.5% - but it only contributes 1% to the overall GDP figure - then who cares. However a contraction in an industry that provides over 40% of UK GDP - then you would be most worried (and guess which is the biggest contributer to the UK economy?)

    "Finally, we are reminded, not for the first time, that these quarterly figures can and will bounce about a lot in the early months of the recovery."

    This is of course true Stephanie - but the astute amongst us would have been looking at the TREND of the figures, and not their actual values. It's the direction you're heading in which is more crucial than the speed at which your heading there....

    2010 - the year of the great 'recovery'
    Q1 GDP - 0.3% (revised up from 0.2%)
    Q2 GDP - 1.2% (revised up from 1.1%)
    Q3 GDP - 0.7% (revised down from 0.8%)
    Q4 GDP - -0.5% (yet to be revised)

  • Comment number 3.

    The ONS has now confirmed what many bloggers on this website had already feared.

    All money is created as debt bearing interest, and the amount of money (debt) must forever increase to satisfy the repayment of the debt + interest.

    But there’s a catch, if consumers are unwilling to become increasingly indebted, the amount of new money generation inside the economy will slow and the spending power of the consumer will be eroded by interest payments on existing debt.

    According to Credit Action:
    Total UK personal debt at the end of November 2010 stood at £1,454bn.
    The twelve-month growth rate was unchanged at 0.8%

    The growth in personal debt (money) is therefore substantially less than the average interest rate on that debt. Contraction of consumer spending is therefore inevitable.

    The economy of this country has been controlled, distorted and manipulated by the uncontrolled fractional reserve banking system.

    The end product for many is a decline in living standards, and for some unemployment and destitution.

    It has been said on this blog that the younger generation face a life of debt slavery.
    Which, by any measure, isn’t much of a future.

    Last year Douglas Carswell MP & Steve Baker MP introduced a private members bill on banking reform. Largely unreported in the mainstream media it identifies the primary problems and proposes a solution.

    For anyone out there that doesn’t understand how it the banking system works and the price you have to pay there are two links below:

    A short animated film by Paul Grignon, ‘Money as Debt’ (link below).
    http://video.google.com/videoplay?docid=-2550156453790090544#

    A group wishing to change the system (link below):
    http://www.positivemoney.org.uk/

    The ONS data is unlikely to improve, inflation will continue, jobs will be lost, bankruptcies and destitution rise.

    And all this to protect one industry that rewards itself with very large bonuses. Perhaps the size of the bonus has a correlation with the decimation wreaked on the economy.

  • Comment number 4.

    SF wrote: Services still account for the lion's share of Britain's economic activity, and this recovery won't get far without them.

    Please can someone explain to me how the economy overall would improve if we all have our hair cut twice as often as we do now?

  • Comment number 5.

    Oh look. Stagflation is here, just like so many said 3 years ago. What is the solution?! Print more money! Why not, it's a good way to make metal coins obsolete and I don't have to worry about change from £20 for a loaf of bread.

    The joke is that the contraction is far worse due to inflation baskets containing so much deflationary technology. Digital cameras, TV's etc. in an inflation basket? Who cares about cameras when a loaf of bread has risen 50%? These products deflate easily, just like computers, so they skew inflation to the downside.

    Then there is the actual quantity of product. Go and order a BigMac in McDonalds and you'll see what I mean. It may be the same price, but either my hands have grown a lot in the past 2 years or they've shrunk the size of the burgers between the bread.

    The same thing has been happening in the USA for a long time now too.

  • Comment number 6.

    "no-one should be writing any obituaries for Britain's recovery on the back of today's news."

    An ode to the grand UK economy.
    It was a good thing while it lasted - but unfortunately god giveth...and god taketh away.
    It shall be missed by all - especially when we're all eating turnip soup every single day.

    Banks make profits - UK economy is less productive. Go and work it out Stephanie!

  • Comment number 7.

    Stephanie wrote:
    'As I mentioned in my last post, real household income in the UK at the end of 2010 was lower than it was 5 years ago.'

    How come? Have the incomes of the Chief Executives and of the financial oligarchy in the UK also decreased over the past 5 years? The UK needs to wake up. Hundreds of billions of UK pounds have been wasted by a financial elite (leading in deception) in the UK. Worldwide 10-15 Trillion US Dollars have been illegally hidden away (mostly untaxed) in tax havens and through offshore banking, assisted by all the major UK banks. The financial services industry is exploiting the average UK tax payer (someone has to pay for their mega bonuses, country houses, London appartments and failed speculation).
    For more information why the figures by necessity can never add up positively for the average employee in the UK, please read a series of articles posted on my web blog:
    http://globalinsights.wordpress.com/

  • Comment number 8.

    UK economic slowdown explained yesterday, and why ConDem government is making policy errors: http://bilbo.economicoutlook.net/blog/?p=13236

  • Comment number 9.

    ...and now the BBC have added the classic "SHOCK" into their headline.

    Really BBC? - shock for who? For those of us out here who saw this coming like a German Panzer in the flatlands of Holland - or was it merely a shock for those in denial and those who are paid to 'not report the truth'?

    If anyone is shocked by this contraction they need sectioning - I mean this is about as shocking as seeing the sunrise this morning - or the shock I feel when gravity pulls things downwards...etc.

    http://www.bbc.co.uk/news/business/

    BBC - get a life. No shock, no Awe, just destruction and a lot of mis-informed journalists who appear to be totally incomeptent when it comes to analysing the economic situation.

    Still - when the world of football is uncovered to be a pit of sexist and chauvonist peeeeegs and there is 'shock' at that - then maybe some of us are merely 'super perceptive'.

    ....however I suspect not - and this is all designed to pretend it wasn't the fault of the Government, bankers or Economists - it was just unforseen BAD LUCK.

    Yeah - like the 'economic weather' reports Gormless Brown played out in his final days - trying to intimate that events were out of his control (which they were, but not because capitalism is anything like the weather)

  • Comment number 10.

    The Winter's Tale: it was the snow that did it, says Chancellor Osborne. The winter of 1947 and the extension of rationing to feed part of Germany helped to undo Atlee, the perception of the 'winter of discontent' did so much damage to Old Labour in 1978-9, but Mr Osborne will, unlike King Cnut, hold back the frozen tides and plough on regardless!
    Adam Posen's citation of of Paul Krugman's blog entry for September 11 2010, 'One Model to Rule them All', is looking better and better. And the City and its Thatcherism, well, worse and worse.

  • Comment number 11.

    "Lessons from the latest 'growth' figures" is the title of Stephanie Flanders blog.

    Recommend post 03 @ 11:00am on 25 January 2011 - 'Dempster'.

    Good points, well made.
    ------------------------------------------------------------------------
    In addition, my view is that the next quarter figures, no doubt, will look completely different? What people care about is keeping their jobs and homes, and that their children will keep their jobs and homes too over the course of this 5-year 'Coalition' government.

  • Comment number 12.

    #6 writingsonthewall wrote:

    '...especially when we're all eating turnip soup every single day.'

    Surely it should be 'neeps and tatties' (given it is the 25th of Jan)

    Does anyone know whether the deficit (as a percentage of GDP) has risen or fallen ?

    (my money is on us doing an Ireland)

  • Comment number 13.

    The usual weasel words from economists. Before Xmas it was: upcoming VAT rise will encourage big ticket spending and cause service sector growth. Now it's "snow causes slow down". You'll note Germany seemed to do ok - maybe they decide to export snow-ploughs.

    Before Christmas it was "euro plummeting in value against resurgent pound" now it's "pound drops in value, and that's a good thing". You'll notice when the Euro drops it's the sign of an unmitigated disaster, when it's the dollar or pound it's a bit of savvy thinking by those in charge (or at very least a bit of good luck).

    Next week "Fog on the Channel, Europe cut off".

    Or will we see the balanced "SterlingZone in disarray as jobless blackspots [sic] unable to cope with fiscal and economic policy designed to support London". somehow I doubt it.

    No: it's the snow, it's great to have a drop in Sterling, it's part of the plan, it's the way things go (the figures always bounce around). It shows a rebalancing of the economy towards manufacturing. Anything but the truth.

    That we give so much credence to economists, and their bonus-adorned cousins in banking, demonstrates the gullibility of us common folk. They are the equivalent of evolutionary biologists: observe, then make up an untestable hypothesis for the observed results.

  • Comment number 14.

    These figures certainly came as something of a shock. Perhaps the bad weather was an influence. However we should keep some sort of perspective and perhaps wonder about how accurate these figures actually are as notayesmanseconomics points out.
    "Another potentially ameliorating point is the fact that if we look further back into 2010 we saw “upward surprises” to growth in the second and third quarters. The numbers then were unexpectedly strong being initially reported at 1.2% and 0.8% respectively. I wonder if some of the growth unexpectedly reported then has dropped out of the figures in some way giving us a surprise in the reverse direction."
    I notice that he also points out that we are never actually sure that we ever get the figures right.....
    http://notayesmanseconomics.wordpress.com

  • Comment number 15.

    It is all very well to criticise the inflation figures (hedonics, gadgets in the shopping basket) as underestimating the truth. If pay demands are based on published RPI this does, at least, try to keep pay demands lower. If pay demands follow a true RPI figure than you simply get rampant inflation and no-one gains.

    Seeing as GDP includes ALL economic activity not just things that will bring a real improvement in people's lives like manufacturing, scientific advances and exploration etc. then the important thing is that GDP in these useful areas increase. If telephone sanitisers (include here estate agents or whatever your pet hatred or service industry) see a contraction in business then so what?

    What we need now is some tax breaks for the activities that produce a real return (and I don't include banking!) to encourage recovery.

  • Comment number 16.

    Whilst Osborne runs around media outlets "shouting don't panic don't panic" like the upper class twit he is, the markets are dumping the pound and running for cover. They have no faith in this government and we should not either. It is sad repeat of previous incompetent Tory Goverernment who pry on the poor and line the pockets of the rich.
    Sadly, with the liberals facing extinction, there is little likelyhood that they will stand up an be counted (except as the tories they have become)and so we have little opportunity to elect a government that can deal with the mess that the present goevrernment is making much worse by their ill thought out,back of the fag packet policies.

  • Comment number 17.

    I think the beginning and end of your first sentence sums it up perfectly - "Once again...none of the leading City economists even came close."

    What qualifications are required exactly for employment as a "leading" City economist? It seems the ability to be totally wrong on a consistent basis is about the only one. We continually have to suffer the prognostications of these self-appointed experts only to be told 3 months later that they got it wrong again, that the results are a "shock".

    Shouldn't there be an enquiry? Why have standards fallen so low? Could we possibly not outsource these "City economist" functions to a "high-value" centre in Asia? After all, that's what the City has recommended for just about every other area of the UK economy - why not the economists themselves?

  • Comment number 18.

    @Richard35 Post 14

    "as notayesmanseconomics points out."

    Please. If I wanted to read that blog I'd go there. Can you and the other sock-puppet (I forget her name, perhaps Samantha) please stop spamming the board with this link?

  • Comment number 19.

    'Construction' has been a dirty word in the finance sector for over 2 years now. The banks have been pulling their capital out of the area at a tremendous rate (see RBS).
    The large players have struggled but generally have other financing options; small and medium players have simply been blown out of the water as no-one has offered sufficient intelligent alternatives. This last point is true in other sectors but construction has been hardest hit.
    It can hardly come as a surprise that the sector is contracting so aggressively.

  • Comment number 20.

    @muggwhamp

    Two weeks of snow impact a whole quarter ? Actually it is worse than that because from restaurants to gift shops of all kinds, they actually rely for around 40% of their annual turnover in those two weeks. If you imagine the knock on effect on their suppliers, the bad news is not yet done I suspect.

    Whilst Internet shopping has helped, I can assure that even postal deliveries down here in SW England were virtually suspended during that period and "Christmas Post" was still trickling through into January.

  • Comment number 21.

    Stephanie , last year you asked about unexpectedly good figures in construction which helped GDP in one quarter . Well I am certain that never happened as such , it was completely out of sync with previous quarters and afterwards in the sector , all statistics and anecdotal evidence points to a very tough year last year in construction . I suggest you look at Travis Perkins as a bellweather of construction activity . Business failures in construction remain high and with the publice sector squeezed and house prices declining there is no real growth area in construction , therefore only further contraction in construction is anticipated in 2011 and 2012 . I echo the sentiments of the outgoing head of the CBI , there needs to be a growth agenda as well as austerity and that can take the form of tax breaks or reduced bureaucracy to get construction sector moving .

  • Comment number 22.

    I told you so! So George Osbournes laughable excuse that the weather is to blame. The government is not doing anything for the UK economy there's simply no action taken apart from one "get-together" from some UK retailers.

    So Labour were right and most people where like sheep and followed the UK papers. I bet the papers suddenly turn against the Conservative party and switch alliances.

  • Comment number 23.

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

  • Comment number 24.

    At 11:05am on 25 Jan 2011, writingsonthewall wrote:
    "no-one should be writing any obituaries for Britain's recovery on the back of today's news."

    An ode to the grand UK economy.

    =======================================================================
    No faith in mini-brain Osborne's visison for a Private Sector lead recovery then?

    How many net sustainable private sector jobs which didn't susbequently disappear overseas were created when public spending on real services, not propping up the banks, was at its' highest? Answer is probably a couple of hundred thousand at most, which have since disappeared.

    So the efficient private sector and all of their inbuilt 'advantages' created zilch in terms of new jobs during a spending boom time - government and household.

    Therefore it stands to reason that cutting spending - either out of necessity or dogma - will shrink the private sector who rely on public spending contracts and piblic sector workers spending.

    Or have I missed something obvious?

  • Comment number 25.

    I strongly agree now that this government needs to be very creative and introduce some ' blue sky thinking ' to try and get the economy moving forwards . Just as it has been bold in its austerity programme then it needs to also be so with growth , okay the pot is empty but there are things like tax breaks , reduced bureaucracy etc that can be used to move the economy forward and create jobs . The sector I am in construction has seen a growing need for affordable housing but nothing is being done to address this need at a national level .

  • Comment number 26.

    Stephanie,

    I am no fan of ecomonics as my post history shows, but why didn't ecomonists ask what would happen to GDP if it snows in the winter?

    Councils were stock piling grit for this very possibility.

    Can I ask fellow posters if anyone cut back on Xmas spending because of the weather, or because money is a bit tight?

    I am getting a bit fed up with experts almost always getting it wrong.

  • Comment number 27.

    I run a small business in the service sector, and I can tell you exactly why the economy is failing. The coalition has spent the last 12 months endlessly talking down the economy and terrifying customers and investors. Nobody wants to spend anything, because the politicians have been playing politics - which is what we should expect, really. The coalition has pursuaded us all that we are in serious and imminent danger, when the truth is that the government borrowing, as a % of GDP, is smaller than it was for 8 of the 11 years of Thatcher's premiership. It wasn't a crisis then, it's not a crisis now. Yes, it's bad - but not so bad that we need to destroy the economy just to save the economy!

    The facts aren't nice, but they're nowhere near as damaging for growth as the idiological spin put on things by a government which is determined to shrink the state at all costs. Unfortunately, the cost is being paid by ordinary people, and by the small businesses that all parties agree are the powerhouse of growth and new employment.

    I do worry that the coalition spends so much time gazing at a few square miles in the City of London, that they have forgotten about the real economy - without which the City could not function.

  • Comment number 28.

    Steph,

    Why is it such a shock? The Coalition were left with two choices after the banker-boys and the previous administration combined to trash the economy. Double Dip OR Sovereign Debt Crises. They chose the double dip risk, rightly so IMO, because in the case of a Sovereign default we lose control of our economy.

    Sir Richard Lambert was right as well - there's never been a 'growth plan', not under Labour and not under the Coalition. It's all been a 'poke and hope' industrial strategy.But unless we have one of those we're just tinkering.

  • Comment number 29.

    "Lessons from the latest growth figures".

    According to the Daily Telegraph online - Britain is paying £6.4billion to the EU? The second largest after Germany? No doubt, there is chance I have mis-read those figures submitted by the DT....?

    Just google Britain's payments to the EU - or any other EU country, for that matter. Which countries obtain most benefit?

    For the record, I am pro Britain remaining in the EU - but our membership fees need serious re-negotiation by our government. Being a member of a club does not entitle that club to over-charge?

    As members of the Carlton Club, many MPs know this - however, many memberships are tax-deductable or claimed on expenses? Unfortunately, the British public can't claim on an over-priced EU membership?



  • Comment number 30.

    The figures are something of a shock but when I consider my own december and the number of colleagues wwho lost work days wither through inability to get in or cancellations of meetinsg its possibly less suprising than it seems at first.

    I work in a service organisation and the problem with such things cancelling is that our time drives our billing and its fair to say we will have lost a good few days during that month more than I would anticipate in an average quarter so maybe they have distorted the figures as the chancellor has claimed.

    We'll see in the next quarter I guess although I was anticipating a pretty slow Q1 anyway and hopefully this reduces the threat of the BOE raising interest rates which alongside the cuts would be a serious problem.

  • Comment number 31.

    Isnt that rich! Our economy suffers from the same malaise in observation as does our cricket. No sooner do we have

  • Comment number 32.

    Unhampered by education in these matters, I would have thought that 10 days or so of economic paralysis in a period of 90 days and the usual Christmas shutdown, would be quite devastating. People not working and not spending; my personal experience was a steep drop in day to day spending, the lowest Christmas spend for along time, and a lot less travel.

    Perhaps the experts can comment, preferably without blaming MT.

  • Comment number 33.

    20. At 11:47am on 25 Jan 2011, John Haynes wrote:

    "Whilst Internet shopping has helped, I can assure that even postal deliveries down here in SW England were virtually suspended during that period and "Christmas Post" was still trickling through into January."


    Late - but not 'unspent' - therefore no detrimental effect to the UK Economy.

  • Comment number 34.

    ===================================================
    @ 17. davidbrent wrote:
    "Could we possibly not outsource these "City economist" functions to a "high-value" centre in Asia?"
    ===================================================
    Whilst we are at it ... can we outsource the City Investment Bankers to Asia as well? It would cost us all a lot less and they would likely do a much better job!

  • Comment number 35.

    Not too surprising really. For the first time in years that we have no skips in our road! Poundland just opened in the High Street and is doing well! The Coalition are still increasing the fuel price, which does wonders for costs! And La Nina is creating havoc with our weather (or was till recently). If I was in still working I would be squirreling away my money 'cos the Coalition are all stick and no carrot. Where's the Private Sector Economic Growth Strategy? What price a second quarter negative figure - hello Depression again!

  • Comment number 36.

    "Usually, we would expect a strong bounceback in the first three months of 2011, just as the economy bounced back after the bad weather in the first quarter of 2010. But that assumes that households hold on to their spending plans, despite all the bad news on VAT and prices. You have to wonder whether they will instead seek to cut back."

    Well crack addicts take time to be weaned off their habit - what makes you think the UK consumer is any different?
    In spring 2010 the people still had job security in the public sector - the lack of total economic capitulation lead some to believe the recession was indeed over.....

    ......however that has all changed now and nobody (private or public) has job security and we're all scared of rising commodity prices causing us to save more and spend less.

    I expect a 'bump' in the spring of 2011 - but not enough to make it significant - I'll be surprised if Q1 2011 shows growth above 0.1%

    ...but still - I'm not an economist - which is possibly why I'm more right than wrong!

  • Comment number 37.

    Perhaps we should be cautious about trying to explain something that may not be there.

    Inspection of the quarterly GDP over recent years shows that quarterly irregularities and reversals are not unusual. They demonstrate GDP has a significant short term random element in it's behaviour. The flurry of explanations for this quarter's decline seems to be coming mainly from people who earn money from explaining things. Correlation does not imply, much less prove causality.

    Perhaps we we're just expecting trouble.

  • Comment number 38.

    Economists; the only “experts” that despite being wrong most of the time are still listened to.

  • Comment number 39.

    Economists aren't even capable of predicting what has already happened. Why do they persist in trying to predict growth for years ahead? If they have no idea what Oct-Dec 2010 was like, how on earth can they tell us anything meaningful about 2012?

  • Comment number 40.

    26. At 11:57am on 25 Jan 2011, newblogger wrote:
    'Can I ask fellow posters if anyone cut back on Xmas spending because of the weather, or because money is a bit tight?'


    We (me and my wife) cut back because money is becoming tight, the weather had absolutely nothing to do with it.


  • Comment number 41.

    26. At 11:57am on 25 Jan 2011, newblogger wrote:
    Stephanie,

    Can I ask fellow posters if anyone cut back on Xmas spending because of the weather, or because money is a bit tight?

    =====================================================================

    Nope I spent as I would have in terms of On Line, at the Boozer and in the Shops. So did every single person and family I know. Some had delays in deliveries for orders on line but they were already PAID for - i.e. money was spent.

    Suppose too hard for economists to understand - I mean how many of these experts predicted the banking crisis and extent of it.

  • Comment number 42.

    15. At 11:34am on 25 Jan 2011, Chris wrote:

    "It is all very well to criticise the inflation figures (hedonics, gadgets in the shopping basket) as underestimating the truth. If pay demands are based on published RPI this does, at least, try to keep pay demands lower. If pay demands follow a true RPI figure than you simply get rampant inflation and no-one gains."

    ....so you're saying the wage slaves should accept pay cuts and freezes because it's good for the Economy.

    ...and if they can no longer keep apace with inflationary food prices then...."let them eat LCD TV's" - I presume?

    The 'boss' can use whatever measure he wants to work out the wage structure - all that matters is the purchasing power of the worker which is going to be much reduced.

    For the worker, keeping his purchasing power will cause uncontrollable inlfation......loosing it will merely result in a deepening of the economic contraction (worker = consumer).

    This is a lose-lose situation - which is why it's going to get a little hairy over the course of the year...

  • Comment number 43.

    writingsonthewall wrote:
    Lessons?

    2010 - the year of the great 'recovery'
    Q1 GDP - 0.3% (revised up from 0.2%)
    Q2 GDP - 1.2% (revised up from 1.1%)
    Q3 GDP - 0.7% (revised down from 0.8%)
    Q4 GDP - -0.5% (yet to be revised)

    The only lesson I can see that Osborne continues to follow the Irish path of austerity and has not learned one iota from being locked into fiscal tightening. This is bad news whichever way you look at it. Blaming the weather solely is naive and risky path for Osborne. It may be a blip but the trend above does not look good. When you consider that this is last 3 months of the year, before most cuts are implemented and before the VAT rise hit demand. Since then petrol prices have rocketed and inflation is now out of control and we can't rely on the Bank of England to raise interest rates....

  • Comment number 44.

    I can make these predictions for 2011 -
    - Construction will continue to decline
    - Commodity prices and raw materials will continue to rise sustained by demand in developing nations
    - Inflation will rise as there is no downwards pressure to be seen
    - Higher prices will lower demand and GDP will be under pressure all year

    There needs to be positive steps to boost exports . There needs to be a sustained , relentless objective to try and drive growth . There needs to be some steps towards lifting the economy and the people of this country so we are more hopeful and optimistic otherwise we will be wrapped up in gloom and negativity which in itself holds us back . All parties need to be play their part and all MP's should be doing all they can for their constituents , there should be less party politics and more putting heads together to try and drive growth for the good of us all . We may not be in a war but its as good as in some respects .

  • Comment number 45.

    I think it must be very foggy - noone can see what is happening?

    For at least 10 years we all enjoyed the benefits to some extent, either directly or indirectly, of money created on the back of false credit and overspending by our government.

    Now we are suffering a period of adjustment. How long that period lasts depends on how good our medium term strategy is but things must be hard for a while, I would have thought at least 10 years.

    Probably quite hard for a poltician to stand up and say that though!

  • Comment number 46.

    27. At 11:57am on 25 Jan 2011, Russell Jones wrote:

    I do worry that the coalition spends so much time gazing at a few square miles in the City of London, that they have forgotten about the real economy - without which the City could not function.
    =========================================================================

    Forgotten? You and your like are after thoughts my friend. Thatcher's Tories followed by NuLabour followed ConDems sold out to the City, the Banks and the Multinationals who now run the country with puppets in charge.
    Small/medium sized business do brilliantly to live off the scraps normally employing people to do something useful and productive.

  • Comment number 47.

    The current government strategy is to severely downsize the public sector and to rely on growth in the private sector to fill the gap. Is it any coincidence that the figures coincide with 140000 public servants receiving redundancy notices? Where is the necessary growth?

    The government fails to see that public servants are consumers who buy goods and services. It seems that the lie that all the public servants who are being disposed of are 'back office' is starting to unravel. As someone who used to be a front line Trading Standards Officer and who has just been made redundant, I can refute this myth. 2011 is going to be a hard rocky road. I foresee an Autumn Election as the coalition buckles under the pressure. Either that or there will be a massive Heath like U turn by Cameron and his chums.

  • Comment number 48.

    12. At 11:29am on 25 Jan 2011, BobRocket wrote:

    "Surely it should be 'neeps and tatties' (given it is the 25th of Jan)"

    I'll give you swede - but potatoes don't grow in the winter. I'm thinking worst case scenario and I believe turnips grow all year round!

  • Comment number 49.

    Wrongly posted the following on another blog:-

    Any GDP figure is nothing more than an educated (hopefully) guess. To then express that statistic to a decimal percentage point seems foolish. What about calculation margins of error?

    If we carry on clutching at straws as we seem to doing, we'll soon have GDP figures expressed to three decimal places.

    Imagine ... 'Q2 growth rebounded to 0.501%' The recovery has arrived!

    I think our economic experts should take stock of past failures and stop pretending that they can accurately measure activity in a complex and volatile economy.

    It's misleading.

  • Comment number 50.

    #20 John Haynes

    With internet shopping - if you ordered your goods December then the sale was in that Quarter. The fact that 'snail mail' took until January to deliver will not affect the GDP figures.
    None of this is a surprise - as the Darling Brown stimulus ebbs away expect more shock GDP figures.
    One of the problems is that so many in the private sector depend on public sector business. Anyone in the know will confirm government departments have been slamming the brakes on expenditure for a while now.
    Our main export markets have also tanked in a big way and using credit to import is difficult to obtain &/ costly.
    Private sector, especially SME's, I suggest is/are building up cash as quick as possible and hunkering down - why invest now when you know there's a contraction in the pipeline? Why employ more people when NI is set to rise in April and the pension reforms are to be implemented in the next few years?
    Only Osborne could have missed the above which is all 101 Economics when you think about it. "The markets will sort out the adjustment to the economy and wealth will trickle down" NOT.

  • Comment number 51.

    x00,000 (place whatever figure you like for the x as I have no idea how many actually did) of employees received s188 notices in October/November - all these people being told that within the next 6 months you could be another jobseeker.

    With one of these letters in your hand what do you do? Spend like there's no tomorrow, or cut back dramatically because in 6 months time you may not be able to pay the mortgage?

    I know which camp I would have been in and my wallet would have stayed in my pocket, yet Georgy Porgy simply blames snow for all the economic problems this country is in.

    If it wasn't so tragic it would be hilarious.

  • Comment number 52.

    I wouldn't worry about this blip too much.
    Social security claim figures are down and tax revenues are up; much better indicators of the economy.

    Incidentally, is Ed Balls reading your blog Stephanie? His comments appear to change in line with your updates, only with a lag behind you.

    Stephanie for Chancellor!


  • Comment number 53.

    If arrogant Ed Balls & Gordon Brown hadn't wasted all of the tax income when times were good - and then spent even more by borrowing time and time again - we might have something saved for these dark times.

    But alas now we're left between a rock and a hard place. Run up even more debt and become a junk bond country - Mr Balls' solution - or run down the deficit and risk slowing recovery.

  • Comment number 54.

    Stephanie - you wrote " Long-term, it is good news that manufacturing and the like are strengthening, relative to the service sector". Why is manufacturing better than service? Don't we, more or less, have enough stuff - but not enough services - e.g teachers, nurses etc etc...Making almost anything requires processes that add to climate change which is much less the case with services.

    I would also be very interested in your comments, Stephanie, or any other readers, on the brilliant (I think) little film, "The story of Stuff" http://www.storyofstuff.com/

  • Comment number 55.

    Nothing to see here – move on please

    Yes disappointing but not a shock, after all we are only talking about small percentage moves and within statistical analysis probably within 1 standard deviation which means nothing at all! Personally i’ll be happy if this year follows last because I have not got a problem with ‘stagflation’. Whether the markets see it as a chance (the city) to attack is another question? After all having no moral fibre limits their responsibility to their own.

    If you thought the path was going to be easy then I am sorry that you listened to the economists who for the umpteenth time got it ‘a about t’; again! It does seem that they are reading from the incorrect psalms doesn’t it? Forcing yesterdays beliefs on to today.

    15. At 11:34am on 25 Jan 2011, Chris wrote:

    “What we need now is some tax breaks for the activities that produce a real return (and I don't include banking!) to encourage recovery.”

    I can not argue with this but timing is all important, if your foundations are not stable, then no matter what you do, your house will at some point collapse! If you had 4 consecutive qtr growths of lets say 0.2 %, then introduce the tax breaks as you suggest.

    JFH will be along soon with his usual rheteric?

  • Comment number 56.

    The only clear thing here is that economists are the world's worst guessers. Economics as a useful predictor of anything is about as good as astrology (or maybe meteorology). Why Nobel prizes are awarded in this subject beats me.
    Whenever a major financial calamity happens subsequently there is always one economist who apparently predicted it.
    So one economist out of all of them guessed right on one occasion.
    Why we put our faith in the MPC - full of economists - beats me.
    Ken Clarke used to decide the base rate on his 'feeling' about the economy. I seem to remember he did quite well overall.
    Economists-pah! Charlatans would be a better title.

  • Comment number 57.

    The weather had no affect on my expenditure. The continuing economic implosion did. So I left my money in my current account so that it could be swept up by the bank multiplied by 20 and moved off balance sheet because we just need to keep things going.

    Actually I bought family members plenty of tinned food, a bazooka and a box of hand grenades.

  • Comment number 58.

    #23.... why is it referred for consideration?

    Am I not allowed to ask Stephanie to get out of her London City bubble and come and visit the rest of the UK, where us amateur economists were not in any way shocked by today's figures?

  • Comment number 59.

    Nida Ali is hailing the increase in VAT receipt by 9% over the year to December. Note that the increase in VAT isn't a mitigation in this case as 2.5% is 16.7% of 15%.

    So....

  • Comment number 60.

    9. At 11:20am on 25 Jan 2011, writingsonthewall wrote:

    ...and now the BBC have added the classic "SHOCK" into their headline.

    Really BBC? - shock for who? For those of us out here who saw this coming like a German Panzer in the flatlands of Holland - or was it merely a shock for those in denial and those who are paid to 'not report the truth'?

    If anyone is shocked by this contraction they need sectioning - I mean this is about as shocking as seeing the sunrise this morning - or the shock I feel when gravity pulls things downwards...etc.

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

    Indeed! If this has caused "shock" then it will be fascinating how they report things come the Summer/Autumn.

  • Comment number 61.

    Mmm. Remarks so well balanced they're glued on.

    The ONS:

    The decline in the fourth quarter is due to decreases in two of the component aggregate series, namely SERVICES and construction.

    Total services output decreased by 0.5 per cent in the fourth quarter compared with a rise of 0.5 per cent in the previous quarter. The largest contribution to the decline in this quarter was from business services and FINANCE. (My caps)

    ..and you, of Balls:

    He does not seem to be able to decide whether the economy is weak as a result of the coalition's decisions, or in anticipation of them. And the two paragraphs above)

    You mean a policy cannot have effect both in anticipation and actual impact?

    So much incidentally for the bloke Cable is fond of quoting, Oliver Blanchard, who thinks growth in government spending results in reductions in private sending.

    Here contaction is causing contraction


  • Comment number 62.

    Construction - why didn't some of the mighty brains think of the following?
    1. You can't get out of frozen ground.
    2. You can't get deliveries.
    3. People can't get to site, more difficult than getting to your average place of work.
    4. Households cancel because of the weather.
    Also this will be ongoing because if you are behind in the first place you stay behind meaning that later trades like electrical, plumbing etc. are left without their planned workstream and no guarantee of jobs to fill the gaps.
    It's gonna be difficult at least for a while as a small business based in construction.

  • Comment number 63.

    It seems that every time Mr Osborne is interviewed he continually blames Labour for the problems the coalition government is facing and today he blames the'weather'thirteen times in his interview on the growth rate figures! Its time to wake up smell the coffee and take some responsibility Mr Osborne! Your country needs stability and fast!!

  • Comment number 64.

    "that assumes that households hold on to their spending plans"

    How many people have household spending plans to hold onto? This sounds like an economists' simplification.

  • Comment number 65.

    #24 M_T_Wallet - will you not be persuaded that boosting the economy with public spending is no more than a brief, drug-induced "high". Where does that government money come from, after all ? In the long term, there are only three answers - we must export more, we must produce more for home consumption (import substitution) and, bitter pill, we must spend less. As Steph, I think, said, household income in real terms declined 5%. Yes, plenty of private sector firms flourished on the back of (often scandalously imprudent) goverment spending.

    I suspect most posters accept that the government is not doing enough to boost industry. How much would it cost to publish a list of imported products, and the sums involved. to flag up for entrepreneurs, potential opportunities ? Why, for example, do we import chocolate from Germany ? We have a UK chocolate sector, even post-Cadbury, why don't we try to help grow it ? And full marks to that poster who asked what would happen if they got their hair cut twice as often. It would boost the GDP numbers - and the barber would nip out and buy some German Kinder eggs or whatever. And if we all ate out twice as often in a restaurant, what does that actually achieve other than speeding up internal money circulation. But for the Balance of Payments - zilch, maybe even minus zilch. GDP numbers, IMO can deceive and should not be taken on their own.

  • Comment number 66.

    Forgive me for being totally sceptical about the chancello'r excuse for a contraction in the economy, but did we not also have a bad winter in 2009? or doesn't his memory go back that far? I think Gideon is grasping at straws, first he blames the previous Labour government, then when that doesn't work he blames the world wide recession, and now he is blaming the weather, absolutely pathetic. What's his next excuse global warming, the wrong quality of snow, leaves on the line? The man is a smug, self serving idiot not connected to reality, time for a chan ge and quickly, at this rate under his pathetic stewardship this country will go down the tubes rapidly.

  • Comment number 67.

    I am sure I'm not the only one who forecasted exactly this situation back in early December.

    The economy would take a knock because of the UK's complete incompetance in keeping the country and it's industries moving through a month of snow and ice. What is just as predictable is the stupid lemming like reaction of the money markets and economists whose short-termist attitudes have contributed more than a little to swings in currency and stock markets simply because they're doing little more than playing roulette on their computer screens.

    By next Monday there will be some other headline, elsewhere that will lead the same people who were junking sterling today, junking the Euro instead. Is that really any way to run an economy.

  • Comment number 68.

    As Nixon said, Economists - frequently wrong but never in doubt.

    The Pound has already fallen back as Steph points out so up go raw materials again and down go manufactured exports. Lining up nicely for the Double Dip. Thank goodness those N&SI inflation equalling bonds are back on sale in April; mind you they might be following a newly convenient 'inflation index'. My own employer,a manufacturer, has held off price rises for over a year but the pressure on raw materials means it's a 10% rise for our products this year.

    But we can all take comfort from the increasing wealth of the top 5%. Can't we? This forum is too polite to mention the only trickle down I've ever seen.

  • Comment number 69.

    "as it turned out, none of the leading City economists even came close. The lowest forecast was growth of 0.2% - instead the first estimate is for a contraction of 0.5%."

    Not surprising, when you remember that City economists are employed by City companies, so they naturally put a spin on their public statements, designed to serve the interests of their employers.

    They do a good job. For many years governments have done more or less what the City wanted. Many City firms see their best chance that this will continue, in spite of the disaster in 2008, in having a government like the coalition, that will show a very hard face to those suffering economic distress as a result of City friendly policies.

  • Comment number 70.

    PLEASE go and ask the Office for Budgetary Responsibility WHY their forecast was so wrong - and what the implications are if we project the trend forward for the UK outlook.

    I think the dog may well have to start biting the hand that feeds it - the OBR will either lose all credibility, or it will have to seriously question the government's economic policy - which will it be?

    The CBI says no new jobs - OBR says millions of new jobs coming.

    The ONS says 0.5 recession last qtr. the OBR says growth.

    COME ON BBC JOURNOS - go and rock their cradle!

  • Comment number 71.

    @Kit Green. (4.) The most important thing about the economy is not the amount of money in circulation but the speed at which it travels. One of the problems built up by the last government was that people (and institutions) did not have the confidence to spend the money that they actually had. Hence the flow of money slows down with the result that tax receipts reduce, reducing government spending OR increasing government borrowing. Rightly or wrongly, if we all went out and spent more there would be more money coming our way each month.

  • Comment number 72.

    Isnt it rich! She sang. Our economy is just like our cricket. A bit of good news and we become No 1 in the world - only to fall flat on our faces within days.

    So all our talk of growth returning, although we have no idea as to why is supplanted by talk of growth declining and we have no idea as to why. So who has the key to the future?

    There is always an expression of surprise when these figures are published and that indicates that we have not a clue as to what is happening whichever way they go.

    The fact remains that the economy struggles along bathed in solidified debt residing where it does the most damage and where little has been done to alleviate it.

    Unemployment levels progress unheeded as though these can be ignored when our economists are doing their projections.

    Look, dear Stephanie by whom we take our lead, "We do' no' nuffin!" But I do feel, like, I have no doubt, many, that I could write a book on the way things really are and will be if we as a nation remain as bystanders as though we have nothing to do with the game we are watching. But seriously. Why dont you give us a considered viewpoint on the way the economy will go over, say the next 6 months taking all the factors into account. A viewpoint that will take into account all the negative features that bedevil our economy. What we need to kickstart real growth. Where will inflation go and if it persists how long it will be before there is no marketplace for its inflated prices. And all the pain along the way. Without forgetting that dead donkey of debt!

    Why should downturns be such a surprise if we do nothing to substantiate our progress or otherwise as the months go by. So, Stephanie, Do tell!

  • Comment number 73.

    So the City economists got it wrong again. Couldn't they see the weather from where their heads were?

    They will be taking home the bonus millions while we mere mortals struggle to pay for it all once again, come the inevitable Tory double-dip recession - never mind the 1930s, just look at the early 1980s and 1990s.

  • Comment number 74.

    I hate to think about what will happen if it snows again this winter.
    It would also appear that some of those retailers who, despite the snow still had a record breaking Xmas were telling porkies.

    We will have to wait for 3 months to find out if we are in the classic double dip but the VAT increase should secure the deal.

    Why don't we learn? In a recession, government are supposed to spend whatever it takes to replace the lack of private spending until private debt has been reduced to a level where people start spending again.

    Instead they do the opposite and express surprise when they go back into recession.

  • Comment number 75.

    I am not a financial expert nor particularly interested in how it all works, so perhaps can see things in a more simplistic way. (Either that or I’m just irritatingly naive!)

    Looking at the chart of UK GDP Growth in the 1990s, following the recession there were two quarters of modest growth followed by a dip, and then years and years of solid growth.

    Today, following the worst recession since The Great Depression, we have had a few quarters of modest growth followed by a dip.

    I read on these pages of economists and statisticians repeatedly commenting on trends, patterns and normal outcomes.

    Could it not be argued, therefore, that the performance of the economy following the recent recession is behaving in a similar way that it did in the 1990s, but the contraction today is worse simply because the recession was worse?

  • Comment number 76.

    Some reflections on the negative growth figures. The major negatives seemed to be in mining and construction followed less significantly by transport and hospitality. From my industry’s point of view (Transport) I can tell you we were significantly affected by the weather for several weeks and I know many construction projects stalled, started their Christmas break early or works were postponed to January. I can imagine mining was also affected and anecdotally I know of many Christmas party bookings that were cancelled so all of those sectors do seem to have been genuinely affected by the weather.
    Thinking ahead to these 3 months well from my perspective we have been vey busy catching up, anecdotally bars and restaurants are fuller than I am used to seeing at this time of year and the IKEA near Birmingham was rammed this weekend. Evidence of deferred spending from the Christmas period? Well if you spent less on presents or construction than you expected then you will probably spend it in January, just not necessarily on the same things.

  • Comment number 77.

    24. At 11:54am on 25 Jan 2011, M_T_Wallet

    Oh I believe that Osbourne is right on one count - private sector jobs will be created to fill the lost public sector ones....

    ....just not in the absurd timeframe he thinks.

    However I have no doubt that eventually, once there is no public health service, no public education and threadbare public services - eventually some 'capitalist' will step in a provide a sub-standard service for 'a price'

    What's going to be the hard sell is the lack of tax breaks for ordinary citizens - I mean they're paying the same (if not more) - but getting less and less in return - eventually they will give up and start looking for those who caused this mess and falsely claimed they could lead the people to salvation.

  • Comment number 78.

    #47 Philmus wrote: "The government fails to see that public servants are consumers who buy goods and services". Yes indeed so - but where does their salary come from ? Taxation - and government borrowings. Just test the argument by postulating we double the number of civil servants - what a boost to the economy that would be, ha-ha! No Sir, you're talking Monopoly money!

  • Comment number 79.

    At 11:38am on 25 Jan 2011, davidbrent wrote:
    I think the beginning and end of your first sentence sums it up perfectly - "Once again...none of the leading City economists even came close."

    What qualifications are required exactly for employment as a "leading" City economist? It seems the ability to be totally wrong on a consistent basis is about the only one. We continually have to suffer the prognostications of these self-appointed experts only to be told 3 months later that they got it wrong again, that the results are a "shock".

    Shouldn't there be an enquiry? Why have standards fallen so low? Could we possibly not outsource these "City economist" functions to a "high-value" centre in Asia? After all, that's what the City has recommended for just about every other area of the UK economy - why not the economists themselves?
    +++++++++++++++++++++++++++++++++++++++++++++++++++++++++
    Well said. We should also add Governor of BOE,all ministers and PM to the list of jobs transfered to Asia.

  • Comment number 80.

    Stephanie, The last quarter of every year has two non working weeks for many industries. Something like 8% non-productive time compared with say the first quarter. Add to this a further week of weather down-time and the 0.5% contraction actually represents a 11.5% growth.
    Oh and by the way, there will be another dip in july/august because the key industries are on holiday then as well. Funny that noone has explained this to economists.

  • Comment number 81.

    RE: Pam Lawrence on "The story of Stuff"

    I didn't like it.

    Making more "Stuff" is what has made the world richer, healthier and I would argue happier.

    Let me explain one aspect of the happiness argument: only as societies have become richer have we seen time given to liberal considerations, like anti-slavery, state child welfare, anti-racial discrimination, etc. Another would be the increased financial equality between countries that trade and making stuff gives us (30 years ago most of Asia was locked in poverty, India and China are both growing much faster than the older Western economies)

    Let's look at the alternative: what do the 5-6 billion people on earth do otherwise? All return to self-sufficiency farming. This uses much more land than modern large scale farms and so we would destroy all the remaining natural reserves?

    Finally, let's look at the future, which is bright:
    - The world is evolving to use less material - at Christmas we can buy an iphone (or similar) and vouchers and hey presto - less stuff, more fun
    - Scientific improvements in food production (farming) have meant that with a minimal increase in arable land we have been able to feed about 10x the number of people over the last 100 years; with global population expected to plateau at 9billion, we should be able to find new improvements and release more land to become wilderness again - and a greener more wild earth

  • Comment number 82.

    Who cares what Mr. Balls says? If he had not been in office between 1997 and 2010 then our economy would have been in a much fitter state than it is now. Why look to the problem for a solution?

    The fact that manufacturing and agricuture have grown is very good news. This is the sure sign that the real economy is repairing after years and years of abuse.

    As the credit boom recedes into history and the foolish are left to count the cost there is going to be darkness and the gnashing of teeth, but we all knew that the path going forward would be very bumpy and even dangerous. So I am not all that surprised at this outcome.

    I think this indicates that what the Coalition has been doing has not been enough. The focus has been soley on spending cuts and not the broader economy. They really need to get their collective finger out to encourage and facilitate a faster rebalancing of the economy to those growth areas like manufacturing and agriculture. This is where the new jobs will be found.

    It is now time to set about reforming the banks, separating retail from the casinos, splitting up the retail into smaller units and removing the taxpayer guarantee from the casinos. I shouldn't worry too much about what the bankers will say as they don't care about what we say. What is sauce for the goose is also sauce for the gander.

    Then as we make the banks more responsive to the real economic needs of the country we will get the resurgence in manufacturing we so desperately need. What is more, policies from government which faciliate training and investment will only support that process.

    On a closing note the decline in construction is a direct consequence of the light going out in the domestic property market. This need not be a bad thing: it has been seriously out of order for a long time. So now we need to get that social housing built.

    As I said it is time for the Coalition to get its collective finger out and start facilitating. It costs little money to set up your stall and encourage others to invest.

  • Comment number 83.


    Extract from the Met Office:

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

    Widespread heavy snow and icy conditions, 17–23 December 2009
    From around mid-December, cold air from eastern Europe dominated the UK weather. This was to be the start of a cold spell which would continue up to the start of the Christmas period. Widespread frost, ice and snow affected some areas.
    The first significant snowfall occurred on the night of Thursday 17 December and into Friday 18 December. Parts of south-east England, Yorkshire and north-east England were badly affected, with particularly deep snow in parts of East Anglia.
    By the weekend of 19/20 December the cold air had spread across much of the North Atlantic, effectively surrounding the UK.
    On Sunday 20 December heavy snow from the north-west affected western areas of Scotland, northern England, and Northern Ireland.
    On Monday 21 December heavy snow affected southern areas of England during the late afternoon and evening, as milder air from the south mixed with the cold air already across the UK. Snow was particularly heavy during the evening rush hour in parts of Hampshire.
    On Tuesday 22 December eastern areas of Scotland had frequent snow showers.
    By Tuesday night less-cold conditions began to move into parts of south-west England. However, the wintry problems were far from over as rain fell onto frozen road surfaces leading to ice on many routes in Cornwall, Devon and Dorset.

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

    Let's be honest now we had snow last Christmas.
    And the economy grew by 0.1%.


  • Comment number 84.

    The economic adviser Nida Ali said "Tax receipts seem to be growing nicely and it's interesting to see that VAT receipts were up almost 9% on last December. Though part of this reflects the higher VAT rate (17.5% against 15%), it also suggests greater consumer activity in December than other sources have reported."

    This is utter rot. The change in VAT from 15 to 17.5% should have created a 16.7% surge in VAT receipts. Economics really is the dismal science - it hasn't even mastered basic arithmatic. Rather than contradicting the picture of a slowdown this piece of Treasury data strongly validates it. What is rather alarming is that neither government ministers, nor BBC journalists appear to be capable of recognising it.




  • Comment number 85.

    ...as one of the big declines was in the service sector - can someone explain to me how the weather affects this?

    I mean most services are online - my financial advisor didn't shut down due to the weather - he just worked from home instead.

    It's a fair argument to expect the construction industry to suffer from the weather - but only in building. Sales of constructed properties should be minimally affected. I mean Bovis didn't stop selling the flats near me because th weather was bad - and the opportunity of a month with sales and no new builds starting should have been a bumper one.

    ...I suspect the dead housing market has more to do with the decline of construction - as well as the cancelled building projects at schools and other public arenas.

    If you don't have an olympic contract - I wonder if you'll make it through to next year....

  • Comment number 86.

    #48 writingsonthewall

    '...but potatoes don't grow in the winter. I'm thinking worst case scenario and I believe turnips grow all year round!'

    Potatoes store well and those with foresight grow enough to last the barren periods, even those who think that you don't get many seed potatoes for £3 and buy three bags instead of two also end up with more than enough spuds even allowing for losses due to the unseasonable frost and snow. (I gave loads away as I had nowhere to store them)

    If the pound is falling then imports become more expensive and people will buy fewer (but more expensive) items.

    Fuel protests will start if derv gets close to £1.48/lt so unless there is a global drop in the price of oil (to match the fall in the pound) there will be trouble ahead.





  • Comment number 87.

    The coalition took a chance to get all the bad news in early in their potentially short-life. So, measures of Conservative ideology are in - their risk will be a cycle of decline for non-city enterprises, not too bad a risk in their judgement. Wil they look now to stand on their morality in OUR tough times? Will they try to produce practical stimuli? When the economy is pictogrammed as a handbag - they will stick with their morality as a lesson to us all. Nanny always gave us foul medicine to make us strong.....

  • Comment number 88.

    The figures show that the 'Fools' idiotic zero interest rate policy is NOT a catalyst for growth. Growth is a mirage unless interest rates and monetary policy is rationally based.

    Interest rates have to rise - indeed the market will force rates up because of these figures. The pound will fall too - we should have joined the Euro a year ago - we will desperately need the protection of a stably priced home market of 500 million to get a real recovery - yet the Little Englander idiots still have the upper hand and will continue to do severe damage to the country!

    The underlying problem of the private debt overhang MUST be tackled and until it is, we cannot recover. These figures reinforce my analysis of the economy as I have been putting froward for the past years. Government spending must increase and they must spend it on infrastructure projects and not on paying unemployment benefit!

    The only 'shock' in these figures is that experienced by the Harvard (badly!) educated economists who believed their own propaganda against all historical analysis and common sense!

    We need a National Government to tackle this economic crisis - Tory, Liberal and Labour working together for the benefit of the country. This is the worst crisis for over a century since the Long Depression of 1873-1896 - worse than the 1930s - and we have a National Government then so we MUST have one now. The country MUST work together.

  • Comment number 89.

    #57

    I hope you explained that the silver tins with the ring pull on the top are food and the dark green ones with the ring pull on the side aren't :)

  • Comment number 90.

    '... This is what Nida Ali, economic adviser to the Ernst & Young ITEM Club, had to say about today's public finance figures:

    "Tax receipts seem to be growing nicely and it's interesting to see that VAT receipts were up almost 9% on last December. Though part of this reflects the higher VAT rate (17.5% against 15%), it also suggests greater consumer activity in December than other sources have reported."'

    ====================================================

    Oh dear ... another economist missing something important like:-

    "Maybe consumer activity was flat or declined BUT PRICES INCREASED!"

    Honestly!!!

  • Comment number 91.

    53. At 12:23pm on 25 Jan 2011, No more boom and bust wrote:

    "If arrogant Ed Balls & Gordon Brown hadn't wasted all of the tax income when times were good - and then spent even more by borrowing time and time again - we might have something saved for these dark times. "

    Wasted? - I see a lot of new hospitals, a lot of new schools, a lot of publicly beneficial things being bought with those tax receipts.

    ...and what did the bankers do with their bonuses? - I mean we could do with some of that cash right now.

    How many hospitals did the bankers build? - how many schools?

    There may have been a lot of waste in the process - but it's better to be wasteful pursuing something good for society than not be wasteful in pursuing one's own self gratification.

    I'd rather contribute to an underused MRI scanner than a super-car for a Spiv's collection.

  • Comment number 92.

    As I noted at the time, the fact that the bad snow came so close to Christmas meant there was a quite a strong possibility that the short-term loss in sales on the High Street - and online - would not be recouped. If you don't buy a Christmas present before December 25th, there's a fairly good chance you won't buy it at all.

    Now come on. as weak excuses go that takes the biscuit. Apart from citizens of some obscure hamlet on the Yorkshire Moors Xmas shopping was no problem. Anyway several retailers posted increased figures year on year.

    It is the usual problem (post WW2) the UK does not do 'successful economic management'.

    Time to not just join the Euro but also cede economic policy to a German led Federal Europe.

    You know it makes sense.

  • Comment number 93.

    #75. GooGav wrote:

    "Today, following the worst recession since The Great Depression,"

    I think you will find that this recession is worse than the Great Depression of the 1930s - The nearest parallel is over a century ago the Long Depression of the 1870s. I have previously set out in detail why the present problem is worse the the 30s and structurally similar to that of the 1870s. Remember also that interest rates are at the lowest levels since 'the flood' (antediluvian!) i.e. for millennia. In the thirties rates did not drop below 2.5% - never in the over 300 year history of the Bank of England have rates been anywhere near as low as they are at present - and even with this rates the economy can't recover!

    The reason for this is that the debt overhang in the private sector has a death like grip on the country - it must be unwound before we can recover!

  • Comment number 94.

    It's seems that the only people that are surprised by this are the ones that don't live in the real world.

  • Comment number 95.

    40. At 12:13pm on 25 Jan 2011, Dempster wrote:

    "26. At 11:57am on 25 Jan 2011, newblogger wrote:
    'Can I ask fellow posters if anyone cut back on Xmas spending because of the weather, or because money is a bit tight?'"

    I cut back...not because of the weather or the belt tightening.

    I cut back because I simply have got 'enough stuff' - I don't need anymore, the house is full of it. I need a garage sale or an E-bay account.

    I did however buy new boots, new coat and a lot of cold and flu remidies - purchases I wouln't have made if the weather was better.

    The weather never affects the economy - you would need 90 days of incapacitating snow to make a dent in a quarter - simply because most things can be bought online or locally. Only totally ruling out those that aren't would make a difference.

    ...and I correct myself from before - construction isn't affected by the weather - I checked with my builder. Apparently he works in all conditions and if it's snowing outside - there are plenty of internal jobs that always need doing on a large build.

    You'll be surprised to hear that JCB's and other tracked construction vehicles have very little trouble getting around in the snow!

  • Comment number 96.

    Presumably Ed Balls' point is that the slowdown has come from the anticipation of the coalition's aggressive cuts (and uncertainty as to their precise contours). This is a perfectly coherent point. It is not in any way at odds with Balls' additional point that as the cuts actually come into effect, this will further inhibit growth in the economy.

    Of course, it's a further matter whether his claims are true.
    I find them quite plausible, myself.

    Ball's long-held view is that the key UK priority is promoting growth, more than cutting expenditure (necessary though he thinks that is). The CBI's Sir Richard Lambert seems to agree.

  • Comment number 97.

    No. 84:-

    Just remember Simon, there are three types of economist - those who can count and those who cant!

  • Comment number 98.

    71. At 12:52pm on 25 Jan 2011, Broadwood Widger

    What monetarist claptrap.

    By that argument if I pass the same tenner around my street (and the Government takes a little tax for each transaction) - then we can clear the deficit in a few billion cycles.

    ...of course nothing has been created of value (but the velocity of money has increased) - so how does this help the Economy?

    Give it up man - even the monetarists have deserted moneterism - I haven't heard Friedman say anything about this crisis or it's solutions.

  • Comment number 99.

    Stephanie Wrote:
    Lessons from the latest growth figures
    ~~~~~~~~~~~~~~~~~~
    Mushroom is very disappointed, because:-.

    1. There are no reliable figures
    2. The thing they are trying to measure is not growth
    3. The latest figures do not reliably indicate the underlying trend, and
    4. Nobody is going to learn lessons and make policy changes on the back of these numbers.

    Stephanie surely know all this, so whywaste time and effort writing about it?

    Besides, I am still waiting for an explanation (from the last blog) it is that after umpteen years of a reducing cost-base due to offshoring and globalisation, UK plc (and in particular the UK general population) isn't subtantially better off.

    We now know it happened (debt-fuelled growth in the broad money supply), and we know benefitted, but down here in the mushroom farm we don't know the policy-makers allowed/encouraged the impoverishment of their population.

    Not 100% believing the "vested interest" rants, (even my own), mushroom thinks there must be an economic theory which required those with their hands on the levers to pull the "devaluation" toggle when cheaper goods would have been the natural result of the offshoring of manufacturing.

    Even if the alternative to cheaper goods would have been fiscal policies to protect the UK workforce, (which is generally considered a "bad idea" and may even be illegal for a member of the EU.)

    In what way was it good for the UK, that the policy-makers chose to allow the UK workforce to become unemployed, and balanced the resulting obvious decrease in demand by increasing Government spending, while simultaneously devaluing the currency?

    If the combined effect of all these policies was simply to maintain the illusion of "growth" in spending-based-GDP, then I reckon it wasn't worth it.

    Can anybody tell me what bad thing would have happened if all our goods and services had become cheaper as a result of offshoring?

    I know, it is probably Economics 102, but humour a poor mushroom (in plain english if possible.)

  • Comment number 100.

    Economists get it wrong because their theory & models are flawed.
    They are all based upon the subjective notion of value - marginalism.
    They departed from the classical economists, such as Smith & Ricardo, who (admittedly inconsistently) has an objective concept of value based upon labour.

    The trouble for the capitalists was the classical theory exposed the fact that all profit is created by labour.
    That the capitalists live of the labour of workers - as most people intuiitvely know.

    As soon as this foundation was removed they are all at sea.

    The neo-classical theory showed that capitalism was stable.
    The 1930's discredited them & Keynes attempted to show that capitalist equilibrium could be at a high rate of unemployment.
    The 1970's should that Keynesian fiscal stimulus could not generate full employment without debasing the currencies.

    So where are we now?
    Where are the theories that explain capitalist crises?

    As uncomfortable as it is for many it was Marx who carried on the scientific analysis of how capitalism works.
    Marx refined the labour theory of value.
    Marxists emphasise how prices get out of line with values & how crises can restore the law of value.

    But Marxists go further, not just explaining the business cycle, but explaining just how capitalism will breakdown.

    This crisis does show signs of the long awaited breakdown of capitalism.

    But be warned Marxist crisis theory ain't easy.
    If you are a novice don't even try to start with Marx's das Kapital.
    Chris Harman's Economics of the Madhouse in a gentle intro.

 

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