[update] UK economy grows in Q1 2011
 

http://www.bbc.co.uk/news/business-12272717

Have to say it doesn't suprise me that it happened (forecast were between +0.2% and +0.7%)

Wouldn't like to blame it all on the weather though

And if Q1 contracts then we'll be in a double dip recession

Re: 'Shock' Contraction in the UK economy
 

Given the huge importance of the pre-Christmas quarter to the economy and the extent of the bad weather, I reckon the snow etc. played a very big role in the poor figures (which IIRC were particularly bad in the service sector). A truer test will be the following set of numbers and if they're equally bad then things will be indeed looking pretty gloomy.

Re: 'Shock' Contraction in the UK economy
 

With the rise in VAT/Fuel Duty, I wouldn't be too optimistic for Q1. Though I do take your point of not looking at one set of figures - have to see what adjustments are made

Re: 'Shock' Contraction in the UK economy
 

It's definatley not all to do with the weather! Things are going to get worse once the full hit of the VAT increase hits us.

This goverment has got it wrong.

Re: 'Shock' Contraction in the UK economy
 

Well I've just been listening to Ed Balls (on LBC News) trivialising the exceptionally bad weather which swept the UK at the end of last year as akin to 'leaves on the line'. It's odd how, at the time, I seem to recall the his party was slamming HMG's pathetic response to the weather which had brought large parts of the UK to a virtual standstill. Not exactly 'leaves on the line' then was it?? :confused:

Yes, I doubt he'd be saying quite the same thing if were in power but then this is this the sort of ridiculous spin we all got used to during the Bliar/Brown years and it's coming from a guy who played a key role in what went wrong in the first place.

Nice to know you've absolved yourself and your party from any responsibiltiy for the mess we're in Mr Balls.... :rolleyes:

Re: 'Shock' Contraction in the UK economy
 

They're all the same, don't fool yourself mate ;)

Will be intersting to see what happens in the next Q1 results.

Re: 'Shock' Contraction in the UK economy
 

Some are more 'the same' than others IMHO.... :D

There's little doubt that, barring more exceptional circumstances, the next figures should show a truer picture.

Re: 'Shock' Contraction in the UK economy
 

Yes, totally agree.

Re: 'Shock' Contraction in the UK economy
 

I really can`t see the economy going anywhere for quite some time. As these figures show (granted it`s just one quarter) the prospect of a prolonged recovery is very far from guaranteed.
Several friends of mine have recently been made redundant (or have been told the factory is shutting in 6 months). Others say that they have contracts for now but when the`re done unless something comes in their goosed.
One of the factory`s employed ~3 to 5 hundred people and apparently another similar size place has just been closed. Couple that with the services that relied on these places and that`s a whole heap of people out of work.
Lot`s of people are sitting on their hands because they don`t know what`s around the corner, the sale of companies to foreign investors (the American 5 year plan) is not helping as obviously they shut down a UK plant and move it somewhere cheaper when times get rocky.

The economy is like the weather at the moment, cold, wet and not very nice! :mis:

Re: 'Shock' Contraction in the UK economy
 

These figures are at first glance bizarre and make little sense. The main danger is them being used as political capital to oppose austerity, which is quite wrong.

These figures are nothing to do with austerity measures at all, government spending in December was the highest on record, they are to do with the government being so preoccupied with fairness, a nod to the Liberal Democrats, that they are neglecting the more traditional 'capitalist' Tory policies that drive private sector growth.

This is what happens when you have a government that's neither one nor the other and has no identity or genuine direction but tries to please everyone. Regrettably rather difficult when Labour have hooked big swathes of the population on unsustainable levels of public spending and the other parts of the population who are expected to pay for this spending are getting disgruntled.

We need tax cuts, not tax rises. If this means deeper public sector cuts so be it because without the growth the tax cuts promote there won't be anyone to pay for the public sector.

It's that or we jack taxes up to about 45% of the economy, minimise the cuts and watch the same people who campaigned against the cuts whinge and moan about their tax bills as they'll be having to pay considerably more to compensate both for slower economic growth and the loss of revenue due to the Laffer curve - mobile peeps like me will take ourselves elsewhere and pay no tax to the UK at all, while others look for ways to minimise their tax bills as they become more viable and make more sense.

http://www.guardian.co.uk/business/2...rowth-strategy
http://www.channelregister.co.uk/201...business_fail/
http://www.google.com/hostednews/ukp...1295890396453A
http://www.cityam.com/news-and-analy...isten-business

Re: 'Shock' Contraction in the UK economy
 

Not shocked here. This was predicted last year but ignored by the ConDems. Their ideological approach to economic planning is not going to do this nation any favours at all.

---------- Post added at 14:13 ---------- Previous post was at 14:11 ----------

In December of 2009 and January 2010 we had some of the worst snowfall on record at the time, yet the economy grew by 0.4% for two quarters in a row.

---------- Post added at 14:16 ---------- Previous post was at 14:13 ----------

Ths is truly the scary bit:

So the figures published today, do not even include retail output.

---------- Post added at 14:17 ---------- Previous post was at 14:16 ----------

The current figures haven't even shown the last bits of "exceptional circumstances," let alone any possible future ones.

Re: 'Shock' Contraction in the UK economy
 

The above party political broadcast was brought to you by the Labour party, via Flyboy.

So when you're done with that Flyboy how about we discuss all the other economic metrics which make it seem pretty likely that this figure will be revised for the better, or that economies doing a zig-zag is very common when coming out of recession?

You know little things like graduate vacancies going up, business confidence improving, manufacturing improving, etc, etc.

I do agree with you that the ConDems have it wrong though, they are listening too much to the Dems and not following the Cons enough and this was most certainly not predicted beyond by the usual suspects in the Labour party who think the public sector is the economy, not really relevant to this anyway as noted as public spending in the quarter in question was enormous.

Re: 'Shock' Contraction in the UK economy
 

Oh dear, when the economy was improving, slowly at first, all we could hear from the right, was that it was nothing more than a joke and that the if the growth didn't continue it would prove the economy had been mishandled. But when we are now on the brink of another recession, it is, "don't look, nothing to see here." Did you not understand the point, "the ONS says today's numbers focus on the output side of the economy (services, construction and manufacturing) and don't include consumer spending, which is the area that would be most affected by the weather. This means that the second estimate, due in a month, could come in even worse?"

Re: 'Shock' Contraction in the UK economy
 

To think, you have in the past complained when other people politicised threads.

There is nothing to indicate that this is a result of coalition policy. The Labour party's own leader said that the cuts had not yet started as of December 2010. There is nothing interesting to see here beyond political opportunism which you appear determined to bring onto this forum as well.

Unsure what you're talking about referring to 'the right'. Political opportunism is political opportunism, end of discussion. That you're trying to get one over on 'the right' by engaging in the exact same behaviour is entirely your prerogative.

Re: 'Shock' Contraction in the UK economy
 

I was out in Croydon on Sunday afternoon shopping. The area looked like a ghost town in comparison to its usual busy self. With everyone having considerably less disposable income than they had this time last year, you really can't blame the weather for less consumer spending.

Re: 'Shock' Contraction in the UK economy
 

I'd love to spend money but as I'm not sure if my husband will have a job after April I'm being extremely cautious and only spending the minimum I can get away with.
I should imagine most people are doing the same and unless it's a necessity it doesn't get bought.

Re: 'Shock' Contraction in the UK economy
 

Yes, the inflation monster isn't helping either but interest rates had to stay down to try and keep house prices up so people could continue feeling wealthy and the younger generation continue transferring wealth to the older one.

We're probably in for more Quantitative Easing now, further propelling inflation higher and ensuring that the money we all do have doesn't go as far. :mad:

Re: 'Shock' Contraction in the UK economy
 

Nope, don't ever remember complaining about that.

VAT and the fuel duty has already happened, albeit since January. It cannot be denied that the has not influenced how people plan their financial future.

What cannot also be denied, is that when the economy was doing better before the election, it wasn't good, but now when the economy is doing poorly, it is not a bad thing. :confused: Seems a bit upside-down, don't you think?

---------- Post added at 20:22 ---------- Previous post was at 20:20 ----------

But then consumer spending has not even been included in the current figures. So, Osborne's bleating about the weather was a bit of a red herring.

Re: 'Shock' Contraction in the UK economy
 

But, don't they know what they're doing? Aren't the people in power talented? :erm:

It so annoys me that that the cost keep getting pushed to younger generations; they didn't mess it up so why should they pay? It's like getting your children to make your mortgage payments

Re: 'Shock' Contraction in the UK economy
 

Strange - I seem to have spent all my money on my kids; how is that pushing the cost to a younger generation?

Re: 'Shock' Contraction in the UK economy
 

Poorly controlled inflation is theft of money from savers for the benefit of debtors, such as overspending governments. QE was inflationary, totally intentionally, recent interest rate policy has also been questionable.

Leaving the next generation with huge debts so that we can keep our public services, pensions and live to the standard to which we've become accustomed without paying our way is also pushing the cost onward.

Just to clarify my point regarding wealth transfer is the house price increase, first time buyers throwing huge amounts of money up the property ladder just to get a foot on the rung. There's a few reasons for that one.

---------- Post added at 21:06 ---------- Previous post was at 20:59 ----------

Can't be bothered to find examples but I'm fairly sure you've complained about party politics in threads.

The VAT increase made me spend more speaking for myself to take advantage of the lower VAT rate.

Depends on the level of tunnel vision involved. If ignoring everything else and concentrating purely on GDP figures absolutely, but it is of course more complicated.

Regardless it's just the usual politicians playing the usual points scoring game, one difference I will note however is one admitting that things wouldn't be pleasant, or smooth, the other appearing to give the impression that so long as the blank cheques continued things would be fine.

The ONS disagrees. The weather affected construction, hospitality, transport, various things and is responsible according to them for approximately 0.5% of the loss, they claim it would have been flat otherwise.

It's disastrous, politicians are slimy, government is spending far too much which is putting the country further into debt and taxing too much which is killing growth. Usual story.

Re: 'Shock' Contraction in the UK economy
 

As the old saying goes "Don't blame me" - I have always seen my house as a home, not an investment (I have lived in this one for 18 years now, and the one before that for 8 years).

I don't actually remember asking for the house prices to be inflated, in fact, I was quite against it as it made moving from a semi to a detached house very difficult. I seem to remember a lot of money being spent on schools and universities, the main beneficiaries who would seem to be the generations after mine (who also seem to be the ones with the fancy toys like iPhones, iPads, big TVs/BluRays, laptops, etc)

Re pensions, I have always been a member of a private pension fund, and only in the last three years joined a University Pension Fund (which I pay 10% into), and the only thing I have ever bought without having the money to pay for it is my house, which I will pay off near the end of this year.

Once again, "Don't blame me!"....:D (I am a believer in equity, not debt - I wish more were the same).

*and I am not even going to begin to mention the income tax/NI/VAT I have paid over my life....;)

Re: 'Shock' Contraction in the UK economy
 

Oh I'm not blaming most people, it's mostly the fault of multiple governments along with some ridiculously bad lending decisions and the rise of property as an investment :(

Re: 'Shock' Contraction in the UK economy
 

Hmm...can't say that I remember doing it, but if you say so. ;)

Well bully for you, however most people in the real world, couldn't afford to buy that new plasma televison set, the new car, fridge, dishwasher or washing machine. They decided to save their money to pay for food and clothing later.

But Osborne is still spending, the debt is still climbing with little prospect of it getting any better. Osborne's plans are simply not working.

:D LOL, okay then, the real loss should be -0.475%

But they have had a long time now to come up with a workable solution and haven't. It is getting worse. It kind of reminds of a Roman Emperor who ignored the smoke coming from the city.

Re: 'Shock' Contraction in the UK economy
 

Food isn't VAT rated. A number of people I know did the same, it's common sense.

The cuts hadn't started as of December last year. It appears some want it both ways, they want to blame austerity for the bad figure and inform that the austerity isn't working. In case you hadn't noticed the mere prospect of cuts has churned various parts of the population into a frothing, protesting rage, though they sadly appear not as interested in where the money would come from to avoid them.

I missed the word 'the' out. I'll take it as a compliment that you had nothing but a pithy response. A simple acceptance that you were wrong about your inaccurate comment that weather was a 'red herring' would suffice :)

Indeed they have, those words are wasted on me as you are entirely preaching to the converted.

Perhaps you'd care to address those comments to the UK Uncut crew instead, or the Liberal Democrats, or indeed 'the left' in general. They are, after all, the ones who tax excessively and overspend traditionally, in the name of being fair and progressive. We are just enjoying the worst of both worlds right now, austerity, 'progressiveness', and a total lack of direction. Tory-lite without the capitalism friendly policies as they would offend the progressives and socialists.

Re: 'Shock' Contraction in the UK economy
 

Re the weather - only the year before, the then PM stated

Re: 'Shock' Contraction in the UK economy
 

My point exactly. When they're out of power, the coldest December for a century and all the resulting chaos is referred to as 'leaves on the line' with no bearing on the economy... :rolleyes:

The extent to which the weather affected the economy remains to be seen but there is no doubt that it had an adverse effect. Time will tell how much effect other factors like the VAT rise have.

http://www.bbc.co.uk/news/business-12284778

Re: 'Shock' Contraction in the UK economy
 

http://www.bbc.co.uk/news/business-12248301

Sorry to bring facts into the party political broadcast and all that, or point out that in the 'real world' people do actually bring forward spending on items before VAT rises rather than board up their windows and doors and spend all their money hoarding canned food and shotguns before the coalition's brutal (barely sufficient) cuts destroy life as we know it.

Re: 'Shock' Contraction in the UK economy
 

well, is this to include the xmas period?

negative growth during christmas I would consider horrific regardless of weather.

ed balls to be fair was right, and was ignored by the bbc presenter in that confidence is the biggest factor of all in an economy, if people are not confident then they will not spend. So what the public sector actually spent is completely irrelevant as the public are all thinking about cuts instead.

Re: 'Shock' Contraction in the UK economy
 

The confidence is there, all the confidence measures are far better than the GDP figure suggests, that's why it was such a surprise.

Ed Balls will happily ignore that, he's busy rewriting history to engage in his gloating and push his denial agenda. To do otherwise admits that his and Brown's economic strategy was wrong, and nothing quite sums up that side of New Labour quite like the utter inability to admit to getting anything wrong.

Re: 'Shock' Contraction in the UK economy
 

I dont know anyone confident around here.

planned large cuts to public sector which employs 40% of working population.
planned clampdown on benefits with a large amount of people unemployed.
vat rise.

Re: 'Shock' Contraction in the UK economy
 

From the BBC Stephanomics blog

Re: 'Shock' Contraction in the UK economy
 

Surely a VAT rise from 15% to 17.5% should result in an increase of VAT receipts of ~16.5% given equal consumer activity? The fact that it's up by only 9% suggests consumer activity is down.

Re: 'Shock' Contraction in the UK economy
 

If the public sector employs 40% of the working population and there are large numbers of unemployed despite the state employing 4 in 10 your area was frankly in deep excrement before any of this and confidence was probably not exactly in plentiful supply anyway.

That your area came to depend on the state so heavily is disgusting but sadly not atypical.

Re: 'Shock' Contraction in the UK economy
 

So the ConDems took over and growth figures have gone 1.1%, 0.7% and now -0.5% - seems like they have it all under control.

At least the first quarter figuers of a new year usually see positive growth...oh hold on the VAT rise, fuel rise and redundancy notices landing on people's door mats will hit those figures. Welcome to the double dip.

Presumambly the snow that they are blaming was that pesky socialist stuff as well was it?

Re: 'Shock' Contraction in the UK economy
 

Thing is, who would be better? The way I see it they are all as bad.
Labour has the 'spend spend spend' attitude, including when out of money.
The current coalition has to try to make the money back but seems to fail to grasp that the current way will only cost them more in the long run.
The other options are just as bad
The public votes for labour because the nasty tories hiked taxes, then for tories because labour pretty much bankrupted the country.

Who do we turn to for improvement? I can't see a single current party that's not part of the problem.

Re: 'Shock' Contraction in the UK economy
 

Hi Chrysalis, look around the world. Look at the deficits that many countries have got. It wasn't just that too much spending was done here, it wasn't really that too much spending was done at all, it was just that public spending is a pretty normal thing to do. Government borrowing is a very normal thing to do.

It is just that the system suffered a big, global crash. Which then required further public spending to prevent an outright collapse. To uphold the system. Hence the current level of the debt. But it was necessary to prevent collapse.

Public spending, in times of recession, keeps the economy from contracting in on itself. If you are a private company and economy starts to contract, then you stop spending. So companies stop doing business with each other. So then they lay off staff, because their business is down.

The private sector will turn in on itself and will make the problem even worse - fact is, it doesn't matter whether you are a socialist or a market fundamentalist - the private sector needs the public sector in order to provide a steady stream of cash flow and to smooth out the peaks and troughs of the economy.

Ideological fundamentalism will not solve the problem. But that is what we have in government - ideological market fundamentalists, so expect it to go pop.


Putting some money through the public sector ensures that people in the public sector keep their jobs. It also ensures that private sector companies can ride out a recession a little more easily, because they keep or win new contracts with the public sector, which is still spending Government money.

Cut the money and you pull the plug on the economy.


That's what the Tories have done, so that they could implement their ideological policies. Not required ones. We don't need to privatise the NHS, or the Post Office (which makes a profit for the country).

No. The wisest course of action is to keep spending through these bodies so that the private sector keeps ticking over.


But instead this government will continue with the opposite course of action.

Sorry for the rant but some posters on here are way off beam.

---------- Post added at 08:30 ---------- Previous post was at 08:28 ----------

Strange how Labour had the spend spend spend attitude, you seem to forget the Tories backed Labours spending plans.

Re: 'Shock' Contraction in the UK economy
 

Nice rant. Some kind of evidence that it related to ConDem policy would be good though.

Growth during recessions zigzags historically, it happens, my main concern about ConDem policy is that it isn't doing enough to encourage growth. The level of public spending cuts they are instituting I consider to be barely adequate.

---------- Post added at 09:28 ---------- Previous post was at 09:03 ----------

Our deficit is the second highest in the EU27 behind Ireland, borrowing nearly 12% of your entire economic output is not a very normal thing to do.

I am astounded that you don't think too much spending was done. I haven't seen anyone, short of people on the extremes, who don't think Labour overspent during their period in government. They increased tax take substantially and ran deficits during a boom. We had the strongest economy in the G7 in 2002, by the time we entered the financial crisis we had gone from being in some of the best shape to weather the storm to worst, due to the structural problems Labour introduced.

Deficit spending during 'boom' parts of the economic cycle is not a normal thing to do. Deficit spending during the 'bust' part is, which is why economies are supposed to pay down debt while the going is good. The UK rolled into the 'global crash' in some of the worst condition of any nation in the OECD, which is why we ran the highest deficit, bar Greece, and have now overtaken them.

Depends whose train of thought you follow, some might say that reducing taxation would be a better course of action. You know, keeping the money in people's pockets in the first place rather than taking it out and putting it back.

The private sector expands and contracts. Interesting you talk about smoothing the peaks of the economy. In what way was running deficits during the good times smoothing anything?

The cuts being instituted are nothing more than a correction back to the already frankly unacceptable trend. They feel severe due to the extent of the previous overspending.

No need to take my word on it of course.

[img]Download Failed (1)[/img]

Constantly expanding the public sector crowds out the private one and the taxation required to support this expansion stifles growth, or clocks up debt which then has to be repaid or inflated away. The previous growth was largely an illusion anyway.

Keep spending you saddle the economy with even larger debts which require increases in taxation to be supported and reduce funds available for future investment.

The Post Office has veered between profit and loss, it requires substantial investment and has a huge unfunded pensions liability, it's not that simple. The NHS is not being privatised, such a statement is ideological.

Most mainstream economists vehemently disagree. The money markets disagree. The business community disagrees.

The rant is fine, but disagreeing with the suggestion that the country should borrow its way out of debt isn't being 'way off beam'. It's not even like they could claim following Keynesian economics, they threw that down the toilet when they ran deficits when they economy was expanding.

Interesting how you call the Tories ideological in their desire to cut the public sector then note that they backed high spending, and that you ignore that some elements of Labour were nervous over deficit spending some 4+ years ago, which was ignored by mssrs Brown and Balls.

This government isn't Tory, it's Tory-Lite, nowhere near strong enough on the Tory side and nicely watered down enough obsessing over fairness to take the decisions that promote growth.

This government is just like the old one in many ways, slimy, say anything to stay in power, try and appeal to everyone. Just a slightly bluer shade of grey.

Re: 'Shock' Contraction in the UK economy
 

Take a look here.

http://blogs.channel4.com/factcheck/fac ... ne-it/5559


The claim

“They are clearly disappointing figures but the statisticians tell us that the weather had a huge effect – we had the coldest December for 100 years, businesses were closed, people couldn’t get to work… So we’re not going to be blown off course by the bad weather.�

George Osborne, Chancellor of the Exchequer, 25 January 2011

Cathy Newman checks it out

David Cameron told us before Christmas that the economy was out of the danger zone.

Not any more it ain’t. We now know the economy shrank by 0.5 per cent at the end of last year – hardly the recovery the prime minister cheerily predicted in December.

Ed Balls pounced on the figures as evidence that Britain’s emergence from recession has come to a juddering halt. He urged theTories to come up with a plan B, and fast.

But the Chancellor blamed the figures on little more than a spot of bad weather. The wrong kind of snow, or at least too much of it.

The weather was indeed pretty extraordinary. But can meteorology explain away all our economic troubles?

The background

George Osborne was right about one thing: it was damn cold in December. The Met Office told FactCheck the average temperature in the UK that month was -1C, and that trumps the previous record of 0.1C in December 1981.

But we all knew it was cold, so why did the figures come as such a surprise and how much of a difference did it really make?

The Federation of Small Businesses (FSB) did a snap poll this month and found that the weather did hurt small businesses: 30 per cent said half their staff took at least one day off work, and 24 per cent said they had to close for up to five days.

But the FSB found that businesses were far more worried about the economic impact of the rising taxes. 39 per cent of small businesses said the hike in fuel duty will have a ‘significant impact’ in them; 27 per cent thought VAT would do they same. That compares to 24 per cent who said snow had had a similar impact.

And the Office for National Statistics seemed to echo that – saying today while GDP was “clearly affected� by the weather in December, if you strip out its impact “GDP would be showing a flattish picture rather than declining by 0.5 per cent�.

Beyond businesses closing and people not being able to get to work, you might expect the retail sector to take a hit during the snow.

But in fact retail sales (which account for 5.4 per cent of Britain’s GDP) actually increased by 1.5 per cent in December 2010 – although much less than the 6 per cent increase in December 2009.

The British Retail Consortium said that big ticket buys were hit largely by concerns about inflation, and fears over jobs and income.

One of the sectors worst affected was services, which suffered a 0.5 per cent drop. Not good news, as the service sector accounts for 74 per cent of the economy. There was also a collapse in construction, with a contraction of 3.3 per cent.

So, the weather is by no means the whole story.

It’s also worth pointing out that these stats are just preliminary estimates, so the ONS hasn’t really been able to measure the impact of the snow.

It’s only had 40 per cent of data from the last 3 months – and most of that is from the earlier months of October and November. The rest is an estimate.

Cathy Newman’s verdict

It seems the Chancellor’s claim – repeated ad infinitum in interviews today (16 times in one interview) - that the snow shrank the economy should be taken with a pinch of salt (if indeed there’s any left after the big freeze).

While there’s little doubt the weather was the last thing Britain plc needed, clear skies wouldn’t have given us the economic rebound we were promised by the prime minister.

That’s allowed Labour to forecast a gathering storm – namely that the austerity measures are stifling the recovery.

If the opposition is right and the government’s wrong, watch out for the chancellor blaming leaves on the line for derailing the British economy.

Re: 'Shock' Contraction in the UK economy
 

ignition that is the one single biggest thing you say that makes me baffled, cuts = growth?

I would say keeping people employed is more important than a deficit, there I said it. I suspect some others agree with me but its not a popular thing to say out loud. The government will keep ticking over, its not going to send the world crumbling down around us, those working can support more tax if required, I am a firm believer of the broadest backs should take the biggest part of the burden. I dont like people been taxed just for the sake of it, but I think taxes should go UP during recessions and down during booms. But not down too far of course. Money cycling is key to any economy. People saving up in savings does not = growth.

The manufacturing the shining part of osborne's figures, yet manufacturing took a battering from the last tory government and is now a show of its former self. One reason my city is so dependant on the public sector is that it used to be a major hosiery employer but thats now mostly all gone offshore in typical capitalism drive for profits.

These financial experts arent very good are they, I predicted a double dip and I am not on some 100k a year for been an expert.

Re: 'Shock' Contraction in the UK economy
 

Hi Chrysalis, George Soros on the Beeb on Wednesday:

- Market Fundamentalism doesn't work
- UK cuts could trigger a recession

And that's from someone who knows the workings of the markets pretty well.

http://www.bbc.co.uk/news/business-12291527

Re: 'Shock' Contraction in the UK economy
 

Yes Chrysalis, tax cuts.

dazzer89 - I could quote a blog as fact too. Especially one called 'Fact Check'. Doesn't change that the ONS themselves said that it would have been an essentially flat quarter without the influence of the snow. The rating of 'fiction' is entirely arbitrary and is the writer's opinion.

Opinions do not facts make - we'll only know the full story of the GDP figures when everything has been worked through.

Regardless none of it in any way supports reversing the austerity measures. Perhaps Ms Newman should have mentioned that in December the government spent the largest amount of money it ever has, and that various business confidence metrics, usually a good indicator of GDP, were far better than the figures suggested. She should really stick to the facts rather than her opinion of them.

The BoE Governor noted that this drop was a natural adjustment, it looks bad because the Tories engaged in political opportunism when they were in opposition and are now reaping the rewards :)

---------- Post added at 10:35 ---------- Previous post was at 10:34 ----------

Though not the UK Economy.

From your above link:

A reputation does not an informed opinion make. His thoughts sound like they were based on ideology rather than first hand knowledge by his own admission.

Re: 'Shock' Contraction in the UK economy
 

There was bad snow in January last year, but there was still growth. The ONS, who produce the figures, said growth would have been flat even without the snow. And the spending cuts havent even started to be implemented yet.

You didnt need to be an Economist to see that it was all going to end in tears. Another quarter like the last one and we'll be in double dip recession territory, the LibDems will get even twitchier, the Tories will faction and implode and we'll see an election before Spring next year.

Re: 'Shock' Contraction in the UK economy
 

Except the LibDems won't get twitchier as they are relying on the economy recovering to justify their support for the austerity measures and restore their popularity to some extent with the electorate. They know that leaving the coalition right now would be suicide as they leave with little to show for it in the way of genuine results.

You don't need to be an economist to have an opinion, it's just a measure of how educated that opinion is.

Re: 'Shock' Contraction in the UK economy
 

Anyway. A further argument against and demonstration that this Tory-led approach of huge cuts to public services, uber capitalist, market fundamentalist approach to the economy and generally low tax, low spending approach doesn't work:


Sweden. High taxes. High public spending, allowing tax cuts to fight recession. No austerity shocks. Lots of jobs around.

Public spending, like it or not, is the key to a smoothly running, shock resistant economy. Also, Germany. Increased spending, came out of recession before anyone else.

UK. Increased spending initially, rode out the worst of it, and now since this government came in, we've had 3 successive quarters of slowing growth and now shrinkage of the economy.


They're simply incompetent, but not only that, downright bloody irresponsible.

Re: 'Shock' Contraction in the UK economy
 

as I said ignition if tax cuts dont have other consequences such as spending cuts then no problem, but in this case it isnt the case. Whats going on now is basically giving money back to people who dont need it so much and taking it away from others who need it more simply because the tories think its otherwise 'unfair'.

Re: 'Shock' Contraction in the UK economy
 

That is bang on the money there Chrysalis.

The company I work for have invented a medical patch that uses Manuka Honey to aid wounds naturally. They've had to postpone expansion into the USA due the state of the UK's economy including the recent fuel and VAT hikes.

Re: 'Shock' Contraction in the UK economy
 

Really.

http://www.indexmundi.com/sweden/unemployment_rate.html

Not immune despite not having much of a financial services sector, and it should be noted Sweden have been rolling back the size of their state.

Also noteworthy is that Sweden have been paying down their deficit for quite some time and are very happy about it. How odd given that running deficits is apparently business as usual.

Australia also did much the same thing, a huge austerity package relative to ours, however they actually paid off their public sector debt, in full, and had funds in the bank to throw at it.

We entered in a totally different situation, even without stimulus spending the structural deficit was unsustainable.

Agreed on the first point, that's common sense, however it's about how much of it you do.

Interestingly Germany is already engaged in austerity measures.

http://dealbook.nytimes.com/2010/06/...erity-package/

Are we seeing a pattern here? Again the budget was balanced pre-crisis, not already running deficits.

They seem to be doing ok despite the impending austerity bite.

http://online.wsj.com/article/BT-CO-...12-705004.html

Right. They came in in May 2010 and instantly had such an impact that they slowed down recovery in the quarter April -> June 2010.

The issue with the ConDem policies isn't austerity it's the lack of policies promoting growth. Just throwing money at the public sector is not growth - just ask the communities that are, necessarily, having this unsustainable life support taken away from them.


Really.

http://www.indexmundi.com/sweden/unemployment_rate.html

Not immune despite not having much of a financial services sector, and it should be noted Sweden have been rolling back the size of their state.

Also noteworthy is that Sweden have been paying down their deficit for quite some time and are very happy about it. How odd given that running deficits is apparently business as usual.

Australia also did much the same thing, a huge austerity package relative to ours, however they actually paid off their public sector debt, in full, and had funds in the bank to throw at it.

We entered in a totally different situation, even without stimulus spending the structural deficit was unsustainable.

Agreed on the first point, that's common sense, however it's about how much of it you do.

Interestingly Germany is already engaged in austerity measures.

http://dealbook.nytimes.com/2010/06/...erity-package/

Are we seeing a pattern here? Again the budget was balanced pre-crisis, not already running deficits.

They seem to be doing ok despite the impending austerity bite.

http://online.wsj.com/article/BT-CO-...12-705004.html

Yet almost everyone agrees that it's required and vital for the future prosperity of the country and the general consensus, beyond those on the economic left, is that either pain is felt now or more pain later.

I agree that incompetence is there though, to appease Liberal Democrats many pro-growth policies traditionally associated with the Tories aren't happening. :(

---------- Post added at 11:26 ---------- Previous post was at 11:23 ----------

OK, firstly no-one is giving money 'back' to me through tax cuts they aren't taking it in the first place. It starts out as my money, not the state's.

Secondly the more I have the more I will spend, the more I spend the more money flows, the more money flows the better off everyone is. Your constant discussion about how I will automatically use all of this for saving holds no value at this time due to low interest rates and high inflation.

Tax cuts stimulate production and stimulate economies - that's why VAT was dropped - higher production and healthier economies means all levels of income end up better off.

Re: 'Shock' Contraction in the UK economy
 

ignition whats wrong with increasing income tax to fix the defecit? instead of consumption taxation and public cuts.

Re: 'Shock' Contraction in the UK economy
 

It won't work. Punish the productive section of the economy you reduce the incentive to produce and reduce overall tax take.

http://en.wikipedia.org/wiki/Laffer_curve

To close the deficit without cuts would require an... unpleasant increase in income tax. I am not convinced that taxing people for working is the best way to power the economy, it's a great way to get more people on welfare though as working, across many different income levels, becomes less viable.

What's wrong with taking the state back to historical trend levels Chrysalis? Will the country fall into disarray if we go back to only spending 40% of our entire national wealth on services? Were we in some post-apocalyptic wasteland back in 2005-2006 when this was the spend?

Re: 'Shock' Contraction in the UK economy
 

incentive will always be there, the incentive been in that you pay for your own food and whatever you been taxed at the income beats the dole and been on the street.

Historical trends have a higher income tax ignition ;)

90% top rate?

Re: 'Shock' Contraction in the UK economy
 

Not comparable due to the number of tax bands and relative numbers of people paying the higher rates, along with the extra indirect taxes and higher national insurance now.

http://www.hmrc.gov.uk/stats/tax_str...1974to1990.pdf

The incentive isn't always going to be there, for many of the working poor the financial case for working is precarious enough already without taking more of their income. With increased mobility of labour it wouldn't take a huge tax increase to push large numbers of people abroad.

Re: 'Shock' Contraction in the UK economy
 

well I also mean to reduce consumption taxes, which generally will make the lower paid better off.

Re: 'Shock' Contraction in the UK economy
 

More bad news for the coalition...

http://www.bbc.co.uk/news/business-12306336

Re: 'Shock' Contraction in the UK economy
 

http://www.bbc.co.uk/news/10604117

all this talk of the tories been economy genuises yet check the bottom graph, compare the unemployment to the 2 tory recessions.

Re: 'Shock' Contraction in the UK economy
 

The economy is structurally different now than it was in either of the previous two, especially the first - thanks largely to painful but necessary Tory reforms that have largely prevented the inevitable Labour bust from being quite so severe this time round.

Re: 'Shock' Contraction in the UK economy
 

I'm reserving judgement until next quarter, but it's not looking good for the ConDems.

I hope they have a plan B.

Re: 'Shock' Contraction in the UK economy
 

Yeah it's on it's backside under the Tories "AGAIN".

---------- Post added at 22:12 ---------- Previous post was at 22:07 ----------

We don't produce anything anymore, If you live in a service economy such as ours it's an act of gross stupidity to take cash out of that economy, the only effect it can ever have is to slow consumer spending and confidence and set off a chain reaction that will drive the economy straight back into recession.

The socialists dropped us in it blah blah blah.

1. First of all it was the BANKERS who really dropped us in this mess and how many bankers do you know who are socialists?
Yes, I will concede that Labour govts failed to get to grips with that reprehensible City culture but it was Thatcher and the Tories who invited Financial Services to this country (at the expense of industry) and introduced rampant deregulation that allowed a lot of clever, rich bankers to make even more money off the backs of decent hard working people.

---------- Post added at 22:14 ---------- Previous post was at 22:12 ----------

Election before next spring? You heard it hear first.

Re: 'Shock' Contraction in the UK economy
 

Agreed, time to cut spending more harshly and correspondingly cut taxation in order to reduce the amount of money being taken out of the economy by the government.

Incidentally services produce revenue, revenue means government gets some money in taxes on that revenue. That's what I was referring to by 'productive'.

No, it wasn't bankers alone who dropped us in this mess, it was us, assisted by government policy. We're the ones who borrowed ourselves senseless, they just facilitated it. We were encouraged by the previous two governments to purchase property and the last Labour government indeed substantially incentivised using property as an investment by raiding pension funds. Property boom, people borrowing more than they could afford, writing on the wall.

Private debt was the root cause of these issues. We were the ones doing the borrowing, the banks borrowed to service our borrowing requirements, not for their own entertainment. Those mortgage backed securities fundamentally were backed by the (bad) mortgages of real people. That same debt bubble that powered the economy to such an extent burst. Either the banks were bailed out or they went under taking depositors' funds with them. I would have leaned towards the second option but that's me ;)

It is interesting to note that no-one is commenting on how much government revenue came from those bankers, and indeed how much is coming from them again.

Easy scapegoat, morally questionable in their own right and partly to blame, little interest in defending themselves, easy to throw the whole blame at them. They did what most of us would in their position, and wouldn't have done it if the demand hadn't been there.

That's about as likely as Ed Balls admitting Labour spent too much in government pre-crisis and crippled the country's ability to execute a full stimulus to recover more quickly. Something he has in common with Gordon Brown is an inability to accept responsibility.

If there is an election it's because the Tories want it. There is no way the LDs will be wanting one right now, it would be simply suicidal.

The economy was structurally broken, austerity had to happen if for nothing else so that we could afford Labour's PFI bills. How they managed to raise taxes and run deficits during a boom while hiding all that future liability off the books is a mystery to me, they must have been really spending, that Stephanomics graph is just the on the books stuff. :mad:

Re: 'Shock' Contraction in the UK economy
 

Ignitition I will try and give you a real world analysis of how I see things.

If I see an extra £10 a month in my wages from a tax cut, its unlikely to change my spending habits, and its unlikely to make me feel confident about the economy. Obviously high end wage earners would see a bigger difference in tax cuts but they would simply save it instead of spend it, in that respect it is not taking money out of the economy it is enforcing it in circulation (which you agreed with earlier). Someone stashing money in a bank account is not keeping it in the economy, especially when its off shore.

So lets take someone on 17k a year with say a 10k tax allowance, so taxed 20% on the 7k. £1400 tax a year, paid weekly so £26.92 tax a week on income tax before tax credits. a tax cut of 1% on income tax would drop it to £25.57 tax.

Now give me a honest answer please.

Which is going to make someone feel more confident in the economy so they more willingly spend.

A tax saving of £1.35 a week or the government maintaining spending in public services. As such avoiding announcements about half a million job losses, cuts everywhere, and local firms going bust due to loss of contracts.

The only logical reason I can come to that you pushing for 'more' tax cuts is you on a decent salary and you personally would gain a modest amount. Taxation generally forces money to circulate, it is not the opposite way round. As I said before the fact people moan about paying taxes is proof that they would not willingly spend the money otherwise. A contracting economy in the long run would probably make you lose more because whatever wage increases you would like would become less likely if your company is struggling.

Countries that have higher standards of living generally have higher income taxes as well. The long term reason we are struggling more than france and germany, is we simply stop producing goods, which of course damages exports and GDP, the bottom line of a economy, a service economy is purely based on national confidence. The damage on that side of things was started by thatcher, however I dont put all the blame on her, blair and brown could have reversed her policies but chose not to.

Also I am not dead set against cuts, but any cuts should be done reasonably eg. 1-2% a year, not draconian 80billion annual cuts. These cuts dont feel thought through, they seem to be done to appease a certian part of the population. We are entering a double dip and negative growth is almost a garuantuee for the next quarter. The bright side is if you lose your job you will be paying less taxes.

Re: 'Shock' Contraction in the UK economy
 

Please!

You're making assumptions about the behaviour of higher earners there. That may be the case for the super-rich but many increase their quality of life with their disposable income. Obviously for the super-rich there is a ceiling.

I think you give people too much or too little credit and are being too narrow. You're ignoring entirely the other effects of cutting taxes and focusing purely on the saving to that one individual while taking account of all effects of maintaining public spending rather than focusing purely on services as they directly impact that one individual.

The private sector has been known to contribute to confidence in the economy as well as the public sector you know.

Your example is an extreme one, I would imagine such a person to have a minimal disposal income in any event. I am amused that you mentioned an income before tax credits though, few things show up how pathetic our taxation and welfare system is better than handing working people money to top up their incomes while charging them tax and national insurance (which incidentally you forgot to mention and for low incomes is far more significant).

My company is performing extremely well and frankly public spending is having a far greater effect on my personal wealth through the inflationary effects creating hundreds of billions on pounds from thin air to purchase government debt is having. Looking at the inflation figures and how they affect minor things like food prices I would suspect that inflation is going to bring pain across the income spectrum.

That however isn't the point. The point is that we don't pay for our public services, indeed at very least in the short term we are as an economy not structured to be able to pay for public services. On the books spending of close to 50% of GDP in the public sector which easily goes over 50% of GDP when factoring in those stashed away expenses is not sustainable when the overall tax burden is pretty much as high as it ever has been at about 40% of GDP and people are protesting that. I said overall burden by the way, not income tax.

It's not austerity that's the problem, it's the lack of pro-growth policies. Only those on the left advocate a reversal of austerity measures, the centre and right are far more concerned about the lack of stimulatory policies to take up the slack.

Countries that have higher standards of living generally have higher income taxes as well. The long term reason we are struggling more than france and germany, is we simply stop producing goods, which of course damages exports and GDP, the bottom line of a economy, a service economy is purely based on national confidence. The damage on that side of things was started by thatcher, however I dont put all the blame on her, blair and brown could have reversed her policies but chose not to.

Where did you get 80 billion annual cuts from? That's the entire cuts package over the entire course of this 5 year parliament.

You mentioned 1-2% a year. I hate to tell you this but these cuts average out to about 2.5% a year. That some consider them to be so draconian is merely a measure of both how excessive the state's spending has become and how accustomed to that level of spending, while remaining extremely resilient to the level of taxation required, we have become.

It is interesting how it was perfectly fine to have the most sustained and largest increase in public spending since the 2nd world war but correcting that level of spending to what is nothing more than the long term trend is draconian.

It is also noteworthy that we both object to the course of the economy, just for very different reasons.

Regarding your quality of life comment, doesn't work. 4 of the top 5 have lower tax takes than we do and one of them is having to engage in strong austerity due to overspending despite the state eating over 50% of the entire country's income in taxation.

It's a slightly better picture if we go out to the top 10 but still 7 out of 10 have a lower tax take as a % of the economy than us. The evidence would appear to disagree with you regarding high state spending equaling quality of life.

I tend to take the view that high state spending absolves people of responsibility for themselves, takes away some of the incentive to strive to be better, and fosters a sense of entitlement. Recent experiences in the UK of Labour's grand social engineering project would appear, at first impression, to bear this out.

Re: 'Shock' Contraction in the UK economy
 

If you reffering to the problem where low paids jobs are worse off for people than some on benefits, I agree thats a problem that needs fixing. The only situation where I would find acceptable for someone on benefits to be as well off as someone working is if they have no choice ie. due to health reasons or are retired.

I also have took in your views and my concern is how do we raise GDP with a shrinking public sector. The private sector wont pick that up unless we start producing things that can be exported. I will check myself into the 2.5% annual cuts, that seems a very low figure compared to what I have read reported.

Re: 'Shock' Contraction in the UK economy
 

Some words from the previous but one leader of the Labour Party and PM

Re: 'Shock' Contraction in the UK economy
 

In purely fiscal terms it isn't even cuts Chrysalis it's just the slowing of growth of public expenditure below the rate of inflation.

Stop thinking about 'things', we are a service based economy and export skills far more than we do physical objects. We have a niche in higher tech manufacturing if we pursue it properly but our place as a manufacturer of any scale is largely over.

Germany is the exception rather than the rule as they were pretty much reconstructed by the allies post-World War 2 and kitted out with nice shiny industrial hardware until reunification.

I largely agree with you, however you are pointing out what's wrong then suggesting that, rather than fix what's wrong, the government spends money on public services. If exports are a route out of the mess that is what the government should be legislating to assist.

It looks as though the GDP figures have reminded them of that, and hopefully more pro-capitalist voices will be heard more given that they are being relied on.

---------- Post added at 13:55 ---------- Previous post was at 13:39 ----------

Just a thought to mull over.

http://www.independent.co.uk/news/wo...y-2197778.html

The only reason the US keeps its AAA credit rating is because it is the US and their currency is the dollar, reserve currency for much of the rest of the world. Their debts are phenomenal.

Re: 'Shock' Contraction in the UK economy
 

I was just surfing and noted a quite interesting factoid.

http://www.reuters.com/article/2011/...7100FU20110201

Why would they do that? Simple, wages in Germany have been essentially flat for several years and there has been zero growth in consumer spending in the past 8 years - they are strongly export based rather than concerning themselves with domestic consumption.

http://www.ft.com/cms/s/0/3eea6b80-2...#axzz1CcQ3xwpc

Can you imagine prolonged wage freezes in the UK?

Re: 'Shock' Contraction in the UK economy
 

I dont need to imagine it, for some its a reality.

In different parts of the country wealth growth is very different from each other, eg. round here during labour's boom it was unknown off to hear about above inflation pay rises so wage infation has been very restricted. Whilst in the south people are going on about how their wage's increased way above inflation. Now round here people are taking pay cuts to preserve their jobs, which to me is worse than a freeze.

Re: 'Shock' Contraction in the UK economy
 

im seeing prices rocketing on some stuff. Couple of years ago I painted my kitchen in Dulux Trade Diamond matt expensive paint anyway as you can scrub it cost around £35-£40 for 5 Litres. This week and only 2 years later its £50 a tin thats one hell of a jump for a short time and there is loads going up like this. Just look at domestic fuel prices 5 years ago I was paying 5p p per kilowatt hour on a DD monthly deal now with EDF I am paying 7.5p per kwh and standard rates and token metres are a lot higher 50% in 5 years is a lot. And petrol well thats just nuts

---------- Post added at 15:42 ---------- Previous post was at 15:41 ----------

on the plus side of course I am a tech freak and consumer electronics have fallen exponentially so it aint all bad lol

Re: 'Shock' Contraction in the UK economy
 

ooogemaflop your post says it all for me, luxuries have either dropped or stayed stagnant, but essentials are sky rocketng, food, fuel 2 prime examples.

Re: 'Shock' Contraction in the UK economy
 

That's nonsense. I know of virtually no-one who has received above-inflation pay rise and the only ones that come to mind are unionised. I have no idea where this comes from but there is no magical dividing line where pay settlements mysteriously get better even within the same company once one goes south of Watford.

There's no way people would tolerate a pay freeze for years on end, unprecedented.

Re: 'Shock' Contraction in the UK economy
 

Local authority in Scotland is considering a 4 day school week -just another horrendous potential ramification of public sector cuts.
The public sector is there to serve everbody in the UK, private industries are there to serve the needs of capitalism. Attacks on public sector spending are counterproductive. Private industry requires the gains from public sector employees and services to exist. As these gains and services are reduced the private sector will contract and yet the population will continue to subsidise, in various ways, the private sector for dubious gains. The private sector will continue to extract vital resources from the economy for the benefit of the few at the expense of the many.
As to pay freezes - these are a reality and at the end of the day a pay freeze is a pay cut.
Thatcher and her political class ushered in such fundamentalist capitalism, Blair, as opposed to Brown, kept it going and the shower in power now are just more of the same.
Doomed, i say.

Re: 'Shock' Contraction in the UK economy
 

Correction: North Ayrshire Council officers have suggested the four-day week as a worst case scenario. And it's one that the councillors do not support. Even the leader of the council (David O'Neil, Labour) is against it, and he has every reason to use a soundbite like this as a Ryanair-style PR stunt.

http://www.bbc.co.uk/news/uk-scotlan...-west-12380012

As usual, there is more to a story than the headline. It's useful to read as widely as possible around these sorts of things, rather than simply swallowing news items without establishing anything beyond whether they scratch your own personal political itch. ;)

Re: 'Shock' Contraction in the UK economy
 

http://www.heraldscotland.com/news/e...ions-1.1083663

Is a link to that mention of a 4 day week. I use mention as the most appropriate word as that's what it was, doesn't look like it's happening and regardless it wouldn't mean children missing out on 20% of their school time as the law requires 190 days of school per year.

This isn't fundamental capitalism, even at 40% of the national income the state is still larger than it pretty much ever has been.

The rest of your post is the usual socialist diatribe. Private enterprise functioned fine before the last Labour government embarked on the largest, most sustained increase in public spending in over 50 years and will do so just fine when that has been partially corrected.

I say partially because the state will still be much bigger and we'll still be facing a 20% higher tax bill than pre-Labour when all is said and done. The public sector cuts are barely adequate for the job to be perfectly honest.

Re: 'Shock' Contraction in the UK economy
 

Ah yes, but i did say "potential" ramification.

It is intersting that you have decided to label me as "socialist". I don't believe i mentioned any political preference, and indeed, if you check my post you will see that i am equally critical of all parties.
The crux of the matter is that the economy is subject to continual readjustments according to the political perversities of whoever is in charge at the time and yet capitalism exists to a large extent outside the capabilities of politicians. This is fundamentalist capitalism.
As to the vexing question of taxation - nobody likes paying taxes but if your taxes are funding sociaty as a whole then we all benefit, when your taxes are subsidising capitalism then only the few benefit.

Re: 'Shock' Contraction in the UK economy
 

... which is still inaccurate, given that the elected members of North Ayrshire will not vote for it and the council leader has said that the idea "Will not fly".

You know, I could make the observation that a bank robbery would make me rich - that doesn't make me a potential bank robber. ;)

Re: 'Shock' Contraction in the UK economy
 

Ah but an idea once thought cannot be unthought, once expressed cannot be eliminated. The mere fact that such like is being considered and being put out there makes the proposition more likely. Vocalsising ideas, no matter how unusual, often solidifies the original proposition, indeed, some would say that this is the very essence of progress. Not to suggest that all solidified ideas are progressive.

Re: 'Shock' Contraction in the UK economy
 

Hezza, you're grasping. You really are. North Ayrshire is not going to implement a four day week for its schools. Nobody is asking for the idea to be unthought; I am simply pointing out that when you consider all of the evidence emerging from North Ayrshire Council, your conclusion that it is a 'potential ramaification' is not justified. Attempting to justify it with cod philosophy will convince nobody but those who were already convinced by your original comments on the matter. ;)

Re: 'Shock' Contraction in the UK economy
 

I described you as such because you were and are advocating a state controlled and based economy.

I am likewise equally critical of all political parties now, because they're all hopeless ;)

We're a very long way outside of fundamental capitalism, fundamental capitalism would have allowed the banks to fail, not socialised their failure.

Agreed regarding corporate welfare, just disagree about where the money should go. My opinion is that it should stay where it is so that people can spend it as they choose not be siphoned off in tax for the state to spend. That's a kind of corporate welfare too.

Re: 'Shock' Contraction in the UK economy
 

bundles of claims from tbb :) who claim uk pay rises have been high the past decade :)

so your experience is the same as mine then with minimal wage rises?

Re: 'Shock' Contraction in the UK economy
 

They have been keeping pace with inflation or slightly above for the past decade, only in the last year or two have the brakes been put on.

Incidentally I've lived in London, the South, the Southern part of the Midlands and the West Midlands and my experience has been much the same in all of them.

If this is another one of those cases where Leicester is some sort of anomaly compared with most of the rest of the UK so be it.

I'm not talking about real wage increases that would take account of inflation incidentally. When I mentioned wage freezes I meant actual, not real. There is no reason why wages should go up by more than inflation unless unemployment is extremely low and labour market conditions allow it, which is something specific to certain occupations and skill sets.

EDIT: I think a point has been illustrated though - describing a wage increase that merely keeps wages the same in real terms as 'minimal' as if people are entitled to a real terms wage increase every year regardless of the circumstances.

Re: 'Shock' Contraction in the UK economy
 

I use that term because I believe official inflation figures to be below real inflation, the first reason for that is there is a 2nd inflation figure which is higher which includes housing costs, so wage increases are based on a inflation figure that excludes housing costs, the 2nd reason is the games played to shuffle goods around in the algorithm so things that go up a lot in price arent used so the official inflation appears lower.

Re: 'Shock' Contraction in the UK economy
 

It is what it is, it may not be perfect but it's a standard. Wage inflation contributes to real inflation too, use the wrong measure carelessly and you push inflation up in every measure.

Inflation is very, very, very bad.

Re: 'Shock' Contraction in the UK economy
 

Looks like it was even worse....

http://www.bbc.co.uk/news/business-12577154

Re: 'Shock' Contraction in the UK economy
 

No real surprise there - we'll see if this is repeated this quarter.

Re: 'Shock' Contraction in the UK economy
 

Yeah, will be interesting to see what effect the VAT rise produces.

Re: 'Shock' Contraction in the UK economy
 

Probably be hidden by deferred spending to be honest. Loads of people spending the money they couldn't over Christmas just before the VAT rise kicked in - remember it didn't kick in on the 1st of January.

Re: 'Shock' Contraction in the UK economy
 

what do you buy on a regular basis that has VAT on it? I know services do but I mean stuff from shops.

Re: 'Shock' Contraction in the UK economy
 

Petrol, clothes, some foods and fruit juices etc.

Re: 'Shock' Contraction in the UK economy
 

It wasn't.

http://www.bbc.co.uk/news/business-13206430

Re: [update] UK economy grows in Q1 2011
 

It's good news indeed. Shows how robust the UK economy's private sector is despite the mismanagement of it by Osborne and the other 'Liberal Conservatives'.

---------- Post added at 10:53 ---------- Previous post was at 10:26 ----------

Incidentally I say it is good news because there are many underlying positives. Not that these will be noticed by the kind of people who post things like:

When of course GDP growth is expressed in real terms - inflation is in itself a GDP increaser so a 4% increase in prices across the board with nothing else changing is, obviously, a 4% increase in nominal GDP as the value of all goods and services produced has gone up by that 4%, or more correctly the value of money has gone down by the requisite amount.

Re: [update] UK economy grows in Q1 2011
 

But, according to those figures, the economy has stood still. Where is that statement incorrect?

Re: [update] UK economy grows in Q1 2011
 

The quote two posts above yours that states perhaps?

Re: [update] UK economy grows in Q1 2011
 

Easy - the comment that the economy has stood still while inflation has carried forward at over 4% is incorrect and misleading. The economy has grown at a similar rate to inflation, GDP figures are given in real terms not nominal.

Re: [update] UK economy grows in Q1 2011
 

The first three months of this year, does not cover the period of September 2010 and March 2011.