UK GDP continues to advance faster than most advanced countries, at a pace Ā well up with the new official Ā forecasts of 2% growth. In the first quarter of 2017 the economy grew by 0.3%, the same rate of growth as in the first quarter of 2016 before the Brexit vote. The annual rate was 2.1%, a figure some are reluctant to report. Ā Real incomes were up, and manufacturing and production were up by more than the rate of general growth, thanks to exports and import substitution.
Pessimistic commentators focus on how Ā first quarter growth was lower than fourth quarter 2016, which was a great figure which none of them predicted. Indeed many of them found it uncomfortable given their forecasts of winter recession. Retail spending was weaker in the first quarter 2017.Ā Easter was later this year so there may have been some problems adjusting the figures for that effect. Food and beverage spending was well up in contrast.
There is a perpetual spin line that weak sterling will lead to price rises which will squeeze consumption which will damage the economy. Those who think this need to answer why it is that UK inflation hasĀ not gone up by more than Germany and by less than US, and to acknowledge that a large part of the UK price rises so far has come from a much higher international price of oil. They should also now be saying that given the pound has risen 8% from its low against the dollar and the Euro, the two main importing currencies, there should be some improved effect on their analysis as imports get cheaper again.
April 29, 2017
Indeed the remainers (and Carney, BoE, May & the government’s) endless threats of doom, punishment budgets and recessions were indeed all totally wrong. The economy is doing OK and this is despite as idiotic, high tax, interventionist, tax borrow and waste, price controlling allegedly Conservative government.
One which is essentially soft socialist under May. The experts similarly told us the economy in the US would tank after with Trump’s policies they we even more wrong there.
A great shame that May and Hammond, unlike Trump, are so wedded to ever higher taxes, more red tape, expensive energy and endless government waste. A shame they have no working compass and sensible vision.
Just as all the climate alarmist predictions and their bogus computer modelling has been proved wrong still no warming since 1998 and nothing outside normal variation before that.
April 29, 2017
“Pessimistic commentators focus on how first quarter growth was lower than fourth quarter 2016”
But that is how GDP is measured here in the UK (Quarter compared with 12 months previously), in fact that is how it is measured in almost all the economically developed world, the USA being perhaps the one exception. If you do not like how GDP is measured then stop blaming commentators, the media and the ONS, ask the government to change the system…
April 29, 2017
Read it again Jerry
“Pessimistic commentators focus on…”
Especially the “focus on” bit.
April 29, 2017
I think you are mistaken. The headline 0.3% figure compares two consecutive quarters, not last quarter with 12 months previously. Also the ONS provides data on all the other measures. JR’s point is that the media chooses to pick out the short term measure rather than the longer term. This can be misleading for the average citizen who doesn’t study the data on a regular basis.
For what it’s worth the timing of Easter will likely have had some effect. It’s not a big deal as it will simply boost the figures for Q2 versus Q1. No doubt journalists will then write about the economy bouncing back.
April 29, 2017
@Jon Davies; “JRās point is that the media chooses to pick out the short term measure rather than the longer term. This can be misleading for the average citizen who doesnāt study the data on a regular basis.”
Politicos do the same, and it has the same effect. But I guess you think it OK for politicos to do so, just so long as it is the message you wish heard.
“No doubt journalists will then write about the economy bouncing back.”
Indeed and certain politicos will use the figures to prove their case, forgetting to mention that it is not really a bounce, just the effects of a late Easter holiday spending spree…
April 30, 2017
But there has not been any mention in the media of the effect of Easter coming later this year and it’s positive effect not therefore being in these figures.
But I will predict when the next quarter figures come out and if they are better the media will discount them by saying ‘but of course these figures include the positive effect of Easter’.
April 29, 2017
If you would care to check, growth in first quarter of 2016 was 0.2% down from 0.7% in last quarter of 2015 and growth in first quarter of 2015 was 0.3% down from 0.8% in last quarter of 2014.
April 29, 2017
Best tell the ONS then….
April 29, 2017
Jerry duh!
April 30, 2017
@getahead; What is “Duh!” about the fact that the ONS figures show at best 0.1% grown in Q1 2017 (as measured against Q1 2016), not the 2.1% our host is trying to headline. What is more if we compare Q4 2016 against Q1 2017 we see a drop from 0.7% to 0.3%. Could you (or anyone) please explain, perhaps give me a URL to the ONS figures that actually show that GDP is up 2.1%?
April 29, 2017
[some people need to] acknowledge that a large part of the UK price rises so far has come from a much higher international price of oil.”
Whilst others need to acknowledge that the international price of oil fell through the floor a few years back but most (non fuel) prices did not do likewise, there were no massive deflationary problems. If oil price has had any effect on the UK inflation it is because of the fall in the GBP, buying less USD for each GDP means oil would be more expensive even had there been none of the movement on the oil markets you suggest because oil is priced in USD.
Anyway, the main worldwide inflation driver is currently China, because their own economy has inflationary issues and this is getting passed on to the RotW via higher factory gate prices.
April 30, 2017
Why is there similar inflation in USA and Germany ?
The media tells us UK inflation is caused by Brexit so it must be something else in these other countries.
April 29, 2017
An absurd discussion on radio 4 just now about the economy and the levels of taxation. Today with BBC favourite lefty Professor Mariana Mazzucato & the wet remainiac Baroness Wheatcroft. I assume being female, lefties and remainiacs was their main advantage in getting BBC airtime.
Where is the voice of reason from someone rational and proven right time and again in the Milton Freedman mode? Where was the voice of people who have actually run businesses and generated real wealth. The country & the economy are crying out for lower taxes, cheaper energy, more freedom and far less intervention. The last thing we need is more incompetent and often even corrupt government.
April 29, 2017
It’s the London liberal lefty mindset.
They live in a bubble of similar minded folk.
That’s why they were so shocked bt the leave vote result and they will be shocked again on June 9th
April 29, 2017
LL, Aren’t you a “slave of some defunct economist” here?
Haven’t you noticed how some months ago JR was talking up the benefits of a devalued currency, now on those of a resurgent currency, commenting on quarter values of GDP, and taking such increase in GDP as the ultimate proof of UK’s success, without, it seems, considering how this actually translates into the weekly supermarket trolley?
Latest example: one year ago, a box of 40 Twinings Lemon & Ginger tea-bags for Ā£3.19, today a box of only 20 of the same product in the same supermarket for Ā£2.19, and no more boxes of 40 on the shelves for possible direct comparison.
Gee, six more weeks of such “incisive and topical commentary” before the election.
April 29, 2017
You need to change your brand of teabag then hef. Supermarkets are full of bargains if you are flexible.
May 1, 2017
The tea bag example is hardly definitive economic proof is it. Come on Hef, you are intelligent contributor. When you are. I did it is interesting to read your view. Stop attacking LL and give us your opinion.
April 29, 2017
Considering government borrowing and the fact we are still importing half a million immigrants annually, growth is very poor.
Coupled with Gideons ludicrous stamp duty regime which has put the brakes on the housing market, it’s easy to see why things are slowing down.
I’ve just renewed my car and motorbike insurance and both have increased due to tax increases.
Government is the cause of weak growth.
We looked at moving house but decided the cost wasn’t worth it so we intend upgrading our present house avoiding as much tax as possible
After all with continued foreign aid and major bungs to Brussels you certainly don’t need my contribution.
April 29, 2017
Comical Johnny at his tricks again. UK plc grew by 0.3 per cent, down from 0.7 per cent in the previous quarter – thats the story .The reason is the growth of inflation and the fact that zero interest rates are now locked into expectations whereas cancelling normalisation gave the economy a biggerest demand boost. It also reflects the continued poor outlook over the next few years .
On Brexit, investors are in wait and see mode with what I regard as an odd tendency to simply mot believe anyone could be so stupid as to Brexit themselves in the foot , sadly we have but t the likeliehood of a lengthy transition would certainly make a vast difference to the ability of companies to cope. Lets hope someone is left in the Conservative Party with ears and an interest in business
I have joined the Lib Dems , I shall be swanning around with the beautiful people today in Lewes where we shall be pointing Ms Caulfield to the exit door .
Reply Why cant you Accept that the economy over the last year grew by 2.1%, with 9 months of that year after we voted to leave? Why do you want to talk down our country and economy?
April 29, 2017
@JR reply; Because that is not what the ONS figures show! Don’t like that fact Mr Redwood, should (as seems very likely) the Tories are returned ask Mrs May to abolish the ONS etc. and return to the discredited ways of the past – the government of the day announcing what ever “Tractor Production” figures best suit their cause…
April 29, 2017
The figures show the economy growing at 2% on an annual basis. This is the highest growth in the G7 and at a time you and many others were predicting recession.
It is the same negative slant with inflation reporting.
Never a mention of USA and Germany having similar inflation.
Media says our inflation is due to Brexit.
So the inflation in Germany and USA is caused by what exactly?
April 29, 2017
Jerry
Thats odd do you have your own version of ONS figures, because I just checked and that is what the ONS appear to say
Maybe if thats wrong you could link us to the correct version
April 29, 2017
Whilst not a fan of the Greek socialist, Yanis Varoufakis, his experience of the EU principals wrecking the Greek economy is relevant and I would agree with his reported advice to Mrs. May – avoid negotiating with the EU at all costs.
April 29, 2017
I really hope that the government gets its act together. By starting negotiations demanding severance payment sets the agenda for a negotiated payment.
The government must declare there will be no payment and walk away.
Letting the EU set the agenda is a bad move. It’s time for the government to set out some red lines.
April 29, 2017
http://www.express.co.uk/news/uk/798084/theresa-may-yanis-varoufakis-brexit-eu-avoid-negotiations-greece-finance-minister
April 29, 2017
his reported advice to Mrs. May ā avoid negotiating with the EU at all costs…..
…. and join the EEA
April 29, 2017
I really see little to negotiate unless the EU moves from its demand for an exit fee in the first meeting.
Walk away and use the time to talk to other countries that want to run a trade surplus with us.
Put in place industrial, educational and agricultural initiatives that reduce our need to run a deficit with the rest of the world.
April 29, 2017
I said last summer that the compounding of Osborne’s neo-liberal austerity and Brexit, would start to show up in Q2 2017, as various hedges and futures contracts run out across the economy. There are still a way to go yet.
The next four quarters are going to be the real tester of the UK economy. Mrs May is wise to lock in another five year parliament; and, must move the fulcrum of government into Downing Street. Away from our Punch & Judy parliament and a cabinet of amateurs; like a real President operates.
BTW. You could have put money on Trump resurrecting the Laffer Curve and the theory of “supply side” economics, both totally discredited. Laffer’s 2009 prediction of hyperinflation for this decade, was spectacularly wrong again.
Laffer is idolised by Neo-liberal Conservatives, particularly the ones that know nothing about macroeconomics. So worth having a read of a five year old piece https://www.theguardian.com/commentisfree/2012/jun/27/laffer-curve-tax-cuts-rich-funny as Trump and May look like trying to resurrect the Reagan era.
April 30, 2017
Trump hasn’t mentioned Laffer.
He said he wants to reduce corporate tax rates to get America’s rates down to similar levels as its world competitors.
April 30, 2017
“More than 40 years after those scribblings, President Trump is reviving the so-called Laffer curve as he announces the broad outlines of a tax overhaul on Wednesday. What the first President George Bush once called āvoodoo economicsā is back, as Mr. Trumpās advisers argue that deep cuts in corporate taxes will ultimately pay for themselves with an explosion of new business and job creation.” (NYT)
April 30, 2017
Well here in the UK lower top rates of income tax is bringing in higher revenues
Lower Corporation tax is bringing in higher revenues too.
Whereas higher Capital Gains tax rates has resulted in reduced revenues.
April 30, 2017
E2: lower/higher, higher/lower. Are those numbers absolute (in Ā£) or relative (in %)?
April 29, 2017
UK plc grew by 0.3 per cent, down from 0.7 per cent in the previous quarter ā thats the story .The reason is the growth of inflation …..
Are you sure about that? Between Jan 2012 and Dec 2013 (2 years) inflation remained well above 2%. During the same period wage growth remained consistently below 2% yet consumer spending ticked along at pretty much the same rate as it did in the 2 years up to Dec 2016.
I’d be a bit reluctant, therefore, to assume that a statistically insignificant fall in real term wages in ONE MONTH (March 2017) can explain a slowdown in consumer spending. This is not to say a slowdown is not taking place – it might be – but I’d give it a few more months before jumping to conclusions about the cause or the extent.
April 29, 2017
We need insurance professionals prepared to live 40 to a house with the government turning a blind eye to it.
April 29, 2017
Lewes – A place hit hard by low-skilled and high dependency migration.
How about an influx of insurance professionals living 40 to a house ?
April 29, 2017
You do have to laugh at the banshees screaming about a 0.3% quarterly rise…. Oh, hold on, these are the same people who were saying that a Brexit vote would lead to an immediate downturn and a recession, massive tax increases blah blah blah….. All hopelessly wrong, look at the figures in the round ?
zorro
April 29, 2017
Good to see that Newmania has found his true spiritual home ?
zorro
April 30, 2017
Among narcissists.
April 29, 2017
As a Briton there are four ways to be on this. We have decided on Brexit – the EU has decided it will be *hard*: 1) Get behind the decision your country has made 2) Be silent on the issue 3) Obstruct the decision your country has made 4) Leave the country. Remain is no longer an option. If we do it will be as a colony of the EU.
April 29, 2017
Thinking ahead, it is looking increasingly likely that we will not be able to reach any kind of reasonable deal with the EU 27.
The arrogance on display from EU capitals, and in particular Berlin and Paris, as well as the EU establishment in Brussels, has led to escalating demands of the UK. These proponents of harsh Brexit are being roundly cheered on from the sidelines by MEPs like Verhofstadt.
What is now being proposed : the entirely unrealistic capital sums being bandied about and the suggestion that we should be required to suffer extended subjugation to the ECJ, is simply not deliverable by any British Government.
Then there is the irreconciliable demand that there be no visible border with the Irish Republic yet no free trade deal. Tariffs require borders so the only option is Free Trade. That is what the British and Irish government want but Merkel and others are saying that we must not be allowed these benefits of membership when outside the Bloc.
Even though tariffs would adversely damage Merkel’s large manufacturing trade surplus with us as well as French andf Italian agriculture, they seem very unlikely to allow it. Merkel in particular is so frightened of contagion that she cannot see the logic. But then this is the woman that closed down all her nuclear power stations through fear.
Politically the 27 have inexorably been painted themselves into a corner so a typical EU fudge seems impossible. I cannot see how this can end well.
Even if a way forward was found, with expectations on the EU side so high, the European Parliament is very likely to vote down any deal that is not punitive in the extreme.
It is essential that we identify and prepare for the consequences of leaving without a deal. We know that David Davies is working on this but as it is such an important issue, should we not be discussing it in depth here ?
April 29, 2017
The broadcasting media seize on any story they think advances their opposition to Brexit. We are fed a daily diet of negativity about the decision to leave the EU. They have become a propaganda machine for the EU never questioning the EU’s approach to Article 50 and forever portraying the UK as weak supplicants. All that is missing is their reports beginning with ‘This is Brussels calling, Brussels calling’.
April 29, 2017
@Brian Tomkinson; So you want to censor the news media, only allow “good news” stories about Brexit?
April 29, 2017
No. Just want accurate and impartial reporting as legislated by broadcasting code but breached on daily basis with impunity.
April 29, 2017
Nobody wants censorship !
All we have ever asked for is objective, even handed reporting.
April 29, 2017
I’ve yet to hear a good news story about Brexit.
April 29, 2017
Leaving the EU is going to be Fantastick
April 29, 2017
Jerry
Thats not what he said. It was that the media do not on the whole give the good news stories prominence. From my field of knowledge its particularly obvious when the BBC especially spin a line about employment, low pay and zero hour contracts whilst completely ignoring the actual data
New should be balanced good and bad ….. it currently isn’t
April 29, 2017
@libertarian; Sorry but if someone want tell the media what it can report and how that is censorship. I see no one accusing the media of telling lies about the ONS figures or their conclusions, just that they do not like how the media have slanted their reporting.
But I accept your point, reporting of the fact by the media should be balanced good and bad, but surely that should also apply to our elected MPs, after all they are parliamentarians for all within their constituency, not just their political supporters?
April 29, 2017
Whilst I agree with our host, I think the volatility in the bottom line measurement is an election time distraction. The UK currently has a good (un)employment performance, but many people are working high hours to survive, many state institutions (NHS, schools etc) are struggling, but the BoE behaves as though the UK has an excess capacity. It still appears that the UK has severe mis-allocation of resources (and inequity) and that this may be a result of a poor tax structure and policy, poor monetary structure and policy.
April 29, 2017
@Caterpillar; Sorry but if you took out all those under-employed, those who want to work more hours, then the UK currently has a very poor employment creation performance in the 16 hours plus sector.
April 30, 2017
Jerry, … so., “a severe misallocation of resources (and inequity)”
April 29, 2017
JR: “GDP up 2.1% on the year ”
According to ‘government figures’ inflation was 2.3% to March ’17
So from a overall perspective, sterling was devalued by 2.3% and the economy claimed to grow by 2.1% a net shrinkage of .2%
Thanks to government policies, over the last year we’re all 2.3% poorer. Not much to boast about.
URL to UK governments office of National Statistics figures.
Reply The ONS reported that real GDP per head rose a little.
April 29, 2017
“Thanks to government policies, over the last year weāre all 2.3% poorer. Not much to boast about.”
By the way, I’m not ‘talking the economy down’, it is, and has been for thirty years, your governments policy to create inflation in the British economy of 2 – 3% each year.
Your government is doing what it said it would do. But don’t try to make us believe we are better off because of that policy.
Measuring an economy denominated in Sterling, which measure is now 2.3% smaller than it was two years ago, is going to make it seem that the economy has grown. When in fact it has contracted.
Reply It has not contracted!
April 29, 2017
The fall in sterling doesn’t make you poorer APL unless you get paid in a foreign currency.
So your final figure is wrong.
April 29, 2017
@Edward2; It does if you need (have) to buy imported goods or services!
April 30, 2017
APL said we are all poorer by 2.3%
Unless everything you buy is imported you are not.
April 30, 2017
@Edward2; Trouble is most things are imported, even if then made into something else here in the UK, just because that widget has a “Made in the United Kingdom” tag it doesn’t mean that the raw materials also have a UK origin…
April 30, 2017
But unless everything you purchase is imported you will not be 2.3% worse off as APL suggests.
It also assumes no change in behaviour by people and companies altering their buying decisions.
May 1, 2017
All blinkered and still fixated on GDP growth, without thinking on the consequences that this “growth” ( to start with, inequally distributed, even in %) might mean to health, environment, …
Clearly not an inch closer to even think of a possible paradigm change.
April 29, 2017
Edward2: “The fall in sterling doesnāt make you poorer … ”
Of course it does.
If you are one of the minority of people who aspire to be modestly independent and you’ve accumulated some assets. The Ā£100 you had put under the mattress ten years ago, it’s worth Ā£77.6 (assuming the government meets its inflation target ).
This type of devaluation, encourages ‘short termism’ in economic activity makes ‘financialisationism’ of economic activity advantageous ( practically obligatory ) and destroys the capital base across the economy.
It encourages all sorts of undesirable speculative economic activity.
Edward2: “So your final figure is wrong.”
The estimation of GDP is based on a sterling to sterling comparison.
The GDP of the UK is denominated in sterling. Sterling has shrunk in value over one year by 2.3% ( a government target ). John Redwood ( and you it seems ) claims measuring a thing with an adulterated measure makes no difference. Clearly, that’s incorrect.
April 30, 2017
You are confusing inflation with sterling’s fall.
Then you assume you are poorer by the same amount that sterling falls
You are not unless everyone you buy is imported and has increased exactly the same amount as sterling falls.
Then you claim we are all poorer because of ten year inflation
First you miss off any interest earned by your savings
It’s your own fault if you keep cash under the bed
Then you assume none of us have had any increases in income over the ten year period
I like millions of others earn more now than I did ten years ago
So don’t include me in your blanket “all”
April 30, 2017
Edward2: “You are confusing inflation with sterlingās fall.”
I disagree, it’s nothing to do with the fx rate, which is external to the Sterling economy. And dependent of other countries competitive devaluation.
Edward2: “Then you assume you are poorer by the same amount that sterling falls”
It’s nothing to do with the FX rate.
Edward2: “First you miss off any interest earned by your savings”
Neatly illustrating my point. Any time up until 1920 you could have left your money in a non interest bearing account and after ten years the depreciation may have been in the order of 3 – 5 %
Still an inflationary effect, but not nearly as bad as during the last century.
Edward2: “Itās your own fault if you keep cash under the bed”
Of course, but you weren’t *obliged* to do so for fear of a 30% loss over ten years.
Edward2: “Then you assume none of us have had any increases in income over the ten year period”
Which (a) ignores the chronically sick or (b) those who are self sufficient.(c) required increases the already voracious drain of welfare provision.
Promoting government corruption.
The sheer growth of government, reflecting 40% – 50% of GDP, mostly to deal with the impacts of its own actions.
It’s also illustrates just one way that government action perverts economic activity, and destroys capital over the long term.
Go back to the ’70s for example. Edward Heath on the one hand fostered inflation of >10%, yet introduced an incomes policy to restrict the rise in earnings.
And let’s not forget the dystopian effects of mass immigration, the pretext of which was that “working class British’ people were too lazy to do the jobs that only immigrants were prepared to do*”.
*What is always left out of that clause, is that British people didn’t want to do those jobs at the rate of pay being offered, BIG DIFFERENCE!
Government spending and graft. It’s far easier to hide graft in a government project costing Ā£10 billion than Ā£10,000
Edward2: “I like millions of others earn more now than I did ten years ago”
Great, but firstly that sentiment illustrates that you’ve been successfully conditioned.
But, if you’re happy to live in a ‘Lira’ economy, if it doesn’t make any difference to you that it’s better to live in the black economy than the legitimate economy, if you’re happy that the government introduces ever more intrusive and labyrinthine tax laws as a result of the long term effects of it’s own inflation policy. If that doesn’t matter to you. OK.
The new Ā£1 coin, looks like the old pre decimalisation threepenny coin, I’d imagine it has about the same purchasing power too.
I object to all these impacts of government policy.
And by the way, it’s not a coincidence that the British economy is in decline during a period of currency debasement. It may simply be correlation but there is a high probability that there is a causation too.
April 30, 2017
Your lengthy post fails to answer properly any of my arguments.
It goes off at so many tangents I realise your mind is made up.
May 1, 2017
Edward2: “It goes off at so many tangents I realise your mind is made up.”
Guilty as charged.
April 29, 2017
I think you will find that GDP is essentially a measure of volume; it is already adjusted for inflation/deflation. The double counting of inflation makes your calculations meaningless. If the inflation adjustment was not made then Venuezala would be the highest growth country in the world.
April 30, 2017
Jon Davies: “If the inflation adjustment was not made then Venuezala would be the highest growth country in the world.”
Check out Venuezala’s inflation rate.
As far as I can see, we are on a similar journey as Venuezala to the same destination. It’s just taking us longer to arrive.
April 29, 2017
According to āgovernment figuresā inflation was 2.3% to March ā17
So from a overall perspective, sterling was devalued by 2.3% and the economy claimed to grow by 2.1% a net shrinkage of .2%
No. GDP is adjusted for inflation (or deflation).
April 29, 2017
John Finn & Jon Davis :” GDP is adjusted for inflation ”
Thanks, I’ll have another look.
April 29, 2017
A rising pound should not be greeted with much in the way of acclaim. Our productivity is way below a level that warrants such an adjustment and the economic benefits of a weaker pound far outweigh the fears of inflation. Germany are doing very well and have done since she joined the euro out of a currency that is way below the level it should be at for that country. Nobody is decrying her weak currency but instead praising her mercantile success. The denigrating utterances of a largely economically illiterate left wing press and politicians are perverse and hypocritical and should be treated with the contempt they deserve.
April 29, 2017
Your pro-Brexit spin on everything is quite incredible – have you been taking lessons from Alastair Campbell?
I thought you might have recalled that last year there was a global downturn, with serious worries about the global economy, especially in China.
Now there is the opposite – a global growth spurt, yet our growth has slowed. Hmmm.
Reply US growth slowed more in Q1
April 29, 2017
John,
Forgive me going OT but why is Ms Miller trying to block Brexit to keep all our EU rights, yet doing so by funding SNP candidates in the GE?
Surely she should be dead against the SNP, they want to take away the even longer existing rights of Scottish citizens citizens who want to remain inthe UK.
April 29, 2017
Ms Miller et al will read into a Tory landslide ‘Europhiles replaced with Eurosceptics’ and argue it is a mandate for soft Brexit. (An option concoted after the referendum and not offered on the referendum slip.)
April 29, 2017
Sorry ‘Eurosceptics replaced with Europhiles’
April 29, 2017
Scottish GDP data for Q4 2016 was published on 5 April 2017 and revealed a contraction of 0.2%, I have not seen the equivalent data for Q1 2017. As UK wide data was published yesterday, I presume such data is available somewhere but I have not found it on the ONS site or on the Scottish gov site.
In the event that its Q1 2017 data is also a contraction – does that mean that Scotland is in recession whilst the UK as a whole is not? What does the say about SNP economic policies?
April 29, 2017
I think the SNP will be in recession after the election !!
April 29, 2017
“There is a perpetual spin line that weak sterling will lead to price rises which will squeeze consumption which will damage the economy. ”
A weaker sterling also means that the prices of UK made products are cheaper in all other currencies such as euros and dollars.
So that will increase consumption by the customers overseas. Our overseas trading partners will buy more from us. Of course we don’t want the pound to fall too far but we should try to get away from the idea that the pound’s value is an indicator of economic health. A high pound can cause damage too.
A high pound will mean that we import more than we export. Someone, either the Govt or the private sector, has to fund that by borrowing.
A high pound does, therefore, create a debt problem for us.
April 29, 2017
You say. “A weaker sterling also means that the prices of UK made products are cheaper in all other currencies such as euros and dollars.”
Exporters of products that have a high percentage of imported components, will raise Sterling prices to keep the foreign currency price similar. They have to buy imported components to make the next batch of cars, with weaker Sterling. They will not ramp up production if the marginal cost is not favourable in the short term.
April 30, 2017
Exports of cars is up.
April 30, 2017
Eight out of ten Nissan; Vauxhall and Toyota cars were sold into the EU. Investment spending across the sector fell from Ā£2.5bn in 2015 to Ā£1.66bn last year, as carmakers and suppliers delayed non-essential decisions because of the uncertainty caused by the Brexit result. (FT)
April 30, 2017
Irrelevant
Your claim was that manufacturing exports would fall
They are not falling
They are rising.
May 1, 2017
“They will not ramp up production if the marginal cost is not favourable in the short term.”
That’s true but is it even possible that it could be unfavourable? For exporter of a finished product there is likely to be a mixture of costs denominated in pounds and foreign currencies.
This will vary from product to product. The higher the UK content the more favourable it will be. Even if there’s no UK content at all, and it is importing and the re-exporting, as might an importer and reseller of electronic equipment from China, the margin expressed in pounds will be higher with a lower sterling than it would be with a higher sterling.
This then allows the option of keeping export prices as they were and making more profit in pounds or lowering them slightly. Either way, the greater incentive to sell or the more competitive prices, it has to be good for the exporter.
April 29, 2017
And having a bias towards services, our exported services (such as professional services and tourism) carry no increase in delivery costs, unlike manufactured goods, so no wonder our balance of trade is improving.
April 29, 2017
Time will tell who is correct, in the meantime like many others we will continue to spend as normal, to upgrade our home, and spend on holidays.
There now seems little point in saving when prices are due to rise, investment rates are so low, and every political party seems to want to steal any money left after we eventually pass on, to piss down the drain on some sort of expensive vanity project, or weired foreign aid programme.
I hope the Conservatives really do get their act together with a sensible CONSERVATIVE manifesto this time around.
April 29, 2017
It’s all UKIP voters wanted. (They did not actually want Nigel Farage.)
April 29, 2017
But surely don’t you agree, JR, that 2.1% annual GDP growth is measly, and that we can do so much better?
With enough spending in the economy, I’d say the UK has the potential to grow close to 15% per annum. Even a decent across-the-board payroll tax cut would get GDP growth up to roughly 5% or more, depending on how large it increases the budget deficit.
Also, if you want to see extremely low inflation alongside the <1% unemployment and massive GDP growth that govt deficit spending creates, then VAT and corporation tax cuts, along with a permanent 0% central bank interest rate policy, will certainly achieve that, too. One of the greatest misunderstandings that the mainstream has is about interest rates and inflation; the truth is the opposite of what they think! Higher interest rates feed into cost structure and directly cause higher inflation, people really need to understand this.
April 29, 2017
By the way, is it significant (and/or to be expected) that the EU27’s negotiating guidelines contain no reference to the UK’s share of – and input to – EU assets, that you have often mentioned, only our commitments and liabilities ?
April 29, 2017
Definition: Gross domestic product is the best way to measure a country’s economy. GDP is the total value of everything produced by all the people and companies in the country. It doesn’t matter if they are citizens or foreign-owned companies. If they are located within the country’s boundaries, the government counts their production as GDP.
So if Britain was totally devastated by many nuclear bombs and had to be totally rebuilt with money and expertise from anywhere the amount of production required would be enormous so resulting in an enormous GDP. Would that mean the UK was doing very well?
May 1, 2017
Indeed, the oil spills of Torrey Canyon in the UK, Exxon Valdez in Alaska, Deepwater Horizon in the Gulf of Mexico nicely contributed to GDP.
Reply These were all disasters we would rather not have had.
May 1, 2017
“The welfare of a nation can scarcely be inferred from a measure of national income.” S. Kuznets, 1934.
“Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Objectives should be explicit, goals for more growth should specify more growth of what and what for.” S. Kuznets, 1962.
May 1, 2017
Dennis,
GDP is only counted as production which sells. So its not possible for me to double GDP by making something and then offering it for sale at Ā£2.2 trillion! Unless the Govt was silly enough to buy it which would be unlikely!
So your example isn’t quite right. If there is a natural disaster like a big oil spill and the Govt is forced to spend money to clean it up, then it does contribute to GDP. If the government builds a warship and it never fires a shot in anger then it contributes to GDP too. GDP is really just a measure of how much money is spent in the economy. It doesn’t necessarily mean that a higher GDP will make us all better off. The money does have to be spent making the right things.
But even if it is spent on the wrong things, like a military plane which was a complete failure, the spending would create jobs and stimulate the economy. But better it is spent on something useful of course.
May 1, 2017
The weak pound and the inflation that has risen from zero over the year both stem from the same source, the Bank of England’s ultra loose monetary policy, with its QE and near zero interest rate. Our inflation over the past year may be similar to those of the US and Germany but ours is ACCELERATING, and will continue to do so unless monetary policy is changed.