Flattening, not falling?

Well the bankers have achieved what the Luftwaffe failed to achieve. My grandfather worked at Redcar works during the war and helped keep the furnaces going in spite of nuisance raiders. They had to dampen down the furnaces to keep the glow from being visible as a target far out to sea.

This really is a tragedy for Teesside which has been producing Iron & Steel for this country for 150 years - never forget that the Sydney Harbour bridge was manufactured on Teesside (shipped like Meccano to Australia) and it stands as a monument to the great age of British engineering and the toil of the many who hewed ironstone from the Cleveland hills.

Economists find it too easy to obsess about the statistics of this recession and not think about what the numbers really mean. If you fall by 10per cent one year, it matters not whether you fall or grow by 0.1 per cent the following year, the news is still bad. You are still, near as damn it, 10 per cent poorer.
"Recession" is merely a statistical definition with no great relevance to the wider economic situation. The reality is that unless something miraculous comes along growth can only achieve mundane levels for many, many years to come. If we want faster growth then the banks must start lending money again. But if they do that, we will be in exactly the same situation as before, with growth built upon unsustainable debts.

Agree with number 2, i can't really get worked up if its a 0.1 % fall or a 0.1% growth, natural learning and advances in technology requires around a 2% growth pa just to stand still. the key to me is how far short we are from utilising all our capacity including labour. i suspect we require double growth before inflation to get to this. Once people are getting back to work or working full time i might be happier. The only use of this statistic is to pay the fat cat bankers 0.1% of the bonus they want

Stephanie, look up the concept 'living extinct'. This is where a species still is alive and breeding but is in terminal decline and cannot recover, it has dropped below a critical threshold. The fact something is not falling in down front of your eyes doesnt mean anything. The nature of business is few involved in an activity will shout they have a problem unless they see it has gone past a tipping point. Hence Redcar. Do you think Redcar is unique. Public sector budgets are set one year in advance, the current year budgets were set some time ago. So public sector contraction will show up next year, the living extinct will show up continually.

So who cares whether it is up or down? Lies and statistics? So the government pumps loads of money (which it doesn't have) into the economy. So what do you expect will happen? Where did all the money come from - from borrowings or the printing press?

So what do these 'statistics' tell us that basic logic does not?

Can I have a printing press too? Then I can cancel my (mortgage) debt? Lets get real!

Then there is the discussion about bonuses. The banks were bust. Employees in bust business loose their jobs. But the government did not let the banks go bust so all the jobs were saved. So thats OK and everyone can have the bonus as well as having a job?

Historians from 2100 will class this time as the fantasy decade. Delusional spin.

Ha! We will rise from recession just as the EU feels the 'double-dip', GB's stimulus package will be hailed as having prevented our recession being more prolonged, the public will rejoice, DC will bicycle (motor car carrying briefcase in tow) back through the impenetrable cigar fug from whence he came and before long we can return to the credit binge that everyone was enjoying so much for the first three quarters of the decade!

Ignorance was bliss!

So the Christmas rush will mean the End of The Recession.

No it won't, as there is no self-sustaining growth out there. The government has thrown everything including the kitchen-sink into reversing the steep decline which started last year. What we have is a contrived recovery, a statistical technicality, a politician's brownie point.

It is time we stopped pretending and accepted that we are in deep trouble. Nothing will even start to return to normal until we acknowledge that simple fact.

Careful Steph you called the recession was ended at the last quarter and got it wrong . At best the economy has been bumbing along the bottom for the last 6 months even with MASSIVE BORROWING not seen sine the WW 2.

If you take into account the 175 + Billion pounds we have borrowed this year our position is dire . The £175 billion is roughly 4,000,000 public sector jobs that are not covered by UK's tax income .

To me that say's it all....

So our recession might be 'L' shaped afterall?

The Government has pumped £200 Billion of QE (printed) money into the economy and it is still shrinking, or if we are lucky, flatlining?

Apologies for not jumping with joy just yet.

As many have said, everything including printing money has been thrown at this recession in the name of 'stimulus' in an attempt to see some growth in time for the next election.

What do you think will happen when the car scrappage scheme ends? When the VAT returns to 17.5%? When the printing press is switched off? And when the government get round to doing something to reduce our £175 Billion annual structural deficit?

We are but only a 'threat of a guilt strike' away from a trip to the IMF!

Again!

Happy xmas indeed! For Labour politicians maybe, who after putting a bonfire under the economy in the form of negative interest rates and printing money at last have the opportunity to say "look, growth, aren't we clever, we've saved the world". For the rest of us, that soundbite has saddled us with a debt that will take generations to clear. In the meantime, we face increased taxes, reduced government spending, lengthening dole queues, hospitals that are germ ridden, schools that don't educate, streets that aren't safe, politicians on the fiddle and unelected bureaucrats from Brussels telling us what to do. Merry xmas Gordon, job well done.

Ms Flanders wrote

Recession may have ended........ Tell that to the 1700 losing their jobs at Corus, I suspect that they may disagree with you.

Ah....Happy Xmas indeed!
The Yule log crackles; the snow falls; and the rosey cheeked children gather around the tree to open their presents.
Yep....if you're an RBS senior executive!
For the rest of us?

Increased construction activity doesn't count.. You can't export it and most of it is Govt funded.

Governments around the world are trying to put a smiley face on any good news. Any increase in GDP should be stated in relationship to the previous falls in GDP and public debt. These ideas that figures can be pulled out of context to make some statement when the reality appears to be the opposite is a reflection of how the problem came to be. There is also the issue of Dubai and the exposure that will bring as well...taxpayers will be forced to pick up that bad investment as well. All this while the bankers attempt to extort bonus money from the government and the government they own will be trying to find some way to make that happen. Sooner or later the banks will need to be nationalized either to prevent a complete financial collapse or revolution. Don't worry bankers have properties in other countries and money in other banks. It will follow the pattern established by departing third world dictators.

Stephanie

Well at least Alastair Campbell and No 10 Downing St will be pleased with your analysis.

But, ... strip out the government spending and QE 'funny money' and then see where GDP is and how much economic damage has been inflicted on the UK during the last 12 years?

The US has borrowed its current growth from the future, while the UK's equivalent efforts have yet to halt the decline. When the stimulus runs out all these chickens will come home to roost.

I see I'm in good company on this blog and won't be breaking out the idiomatic champagne just yet.

Guess what. The stock market rally probably ended about 2 hours ago. Whether Q3 GDP is negative or positive really doesn't matter, it's in the past now.

Roll on the double dip recession caused by the sovereign debt crisis of 2010 to 2012.

Now that the recesion is over can Ms Flanders please email my boss so that I can get a pay rise this year.

My company still thinks there's trouble ahead and is refusing to give anyone in the workforce a raise.

I think we're still doing our goldilocks things of trying to get things just right.

It's not like that though in reality. You're actions affect the economy the knack to making money is turning what you do into cash. You have to be plugged in to the system before what you do counts. At the end of the day it is our thirst for competition that is putting people out of work.

At the top people boast of their success and lifestyle to try and encourage the ones at the bottom to do something. But the truth is closer to say that success has been given to them, not earned, very few people have worked their way to the top.

We are in a habit of same old and all the same people are still at the top and nothing will be different.

We'll be worried when people stop behaving true to type.

Whoop de doo

Even if the economy is not 'falling' it is against the background of economic stimulus that will be ending. Lets see what it does when the money runs out.

We need to plan for a steady state economy. Long term growth will be minimal. We are still one of the richest nations in the world. We can all have a good life on current incomes. World growth will come from the poorer areas catching up. We need to accept a falling population and GDP but work to sustain living standards. No retirement. High tax, high investment to produce goods the world wants with the infrastructure and social care to sustain it.

Dont forget to factor in tax rises and cuts in public expenditure. No cause for celebration until the jobless total starts to fall rapidly. Perhaps thanks to RBS soon we will see a bonus lead recovery!

I just want to go back to dubai for a moment. Economists want insight into people's veiws and behaviours, well I don't know how other people think or what motivates them. You assume greed but it is only describing the most frequent attitude amongst a group of people everyone else is disregarded.

so you assume greed is what motivates all of us. It's a mirror effect you think we think like you think.

So you are surprised that I do not want to go to dubai. Well i have lived in many places and it's not the buildings that matter, or the scenery or anything it's the people.

Some people like crowds and following the herd and we only ever do what the herd does. So you can see that the biggest herd is going to win in the majority situation every time.

We just disregard the minorities. Then we have all these 'experiments' on integration and big ideas all the time but they never work because people never do what we expect them to.

As Stephanie said in the earlier blog 'they want the wider economy to co-operate'.

It sinks in eventually for some. We aren't motivated by the herd we want to run away from the herd. The herd to me means danger, if everyone's going to Dubai then I'm staying right where I am.

But suppose we get to dubai and it's all lovely and beautiful until someone starts their towel on the sunbed and marking their territory.

The novelty soon wears off. it is the story of the new wine. they say the old is better.

To be honest this is no great surprise. The ONS did make it clear in releasing its initial estimates that the margin for error might well mean we were out of recession already – even if large parts of the media and certain people in politics chose to ignore this fact. True, it could equally have meant things were much worse but that was frankly unlikely given the general lack of optimism currently.

I don't mean to sound complacent but, while not good, things are nowhere near as bad as many in the media would have us believe.

UK Govt. debt is currently 59.2% of GDP. High, yes. But still lower than the level in all the other G7 countries BEFORE the credit crunch (source = IMF). True there was a trend of deteriorating public finances in the UK before the credit crunch and there are factors that arguably make true UK Govt. debt higher. But we are in no way in a bad position in global terms, even if certain sections of the media are hell bent convincing us otherwise (probably in order to help perpetuate their self-declared reputation for King-making in UK politics).

As for stimulus, if you look at the G7 nations plus India and China, the UK has the fourth lowest spending on its stimulus package. Only France, India and Italy have spent less. Specifically, stimulus is 1.5% of GDP for the UK compared with 4.4% of GDP for China, 4.8% for the US, 3.4% for Germany, 2.7% for Canada and 2.2% for Japan.

This means that, if it is already out of recession (or close to it), the UK will have achieved this with a lower level of stimulus and a lower risk from negative effects when the stimulus ends than most of our major global competitors.

None of this means much right now if you've just lost your job, obviously. But it is important for the future and I am sick of only hearing the downside.

The private debt level in the UK IS a problem and in my view a much bigger issue than public debt. But we don't hear so much about that. Perhaps it doesn't sell newspapers?

Please stop it! Why are you so obsessed with these little numbers? It doesn't matter at all whether or not the UK is still officially in a recession. All that matters is the debt and the lessons that have not been learned. This is a long-term multilateral disaster, not just a brief "recession".

I have always hated February, the Christmas and New Year festivities are all over and summer seems like a long, long way away. Next year I fear I will hate it even more, along with most of the rest of us, except the bankers of course.

Robiati wrote: UK Govt. debt is currently 59.2% of GDP. High, yes. But...
Robiati wrote: Specifically, stimulus is 1.5% of GDP for the UK...

The liabilities taken on mean UK debt could end up far higher.
A lot of that debt is stimulus by another name.

They are trying to resurrect a system that failed. It failed for many reasons but mainly because of the lack of corruption by bankers and financial services. The corruption in government facilitated the process by turning their heads away from the foregone conclusion.
Every crisis is an opportunity to change for the better yet all we see in every country is the maintenance of the status quo. As they all head over the cliff together we can only hope that the money they have put in their pockets expedites their flight to the bottom.
If the system was not broken, this would not have happened and since it did happen what have they done to change it? Nothing but print more money.
The plan put forth is: You should spend more. You should save more. You should be willing to pay higher taxes....if unemployed you should find a job. You should not ask where all the money has gone or who got it or how they are using it.
My plan is to open a bank, take the money from depositor accounts and retirement funds, bet heavily on bad horses and ask for a government bailout, pay myself a bonus with any money they give me and retire in the islands. I would suggest you each do the same. I'll save you a chair at the beach.

Stephanie

Surely the big story of the moment is that apparently in the Pre Budget Report, Darling is not going to set out how the borrowing requirement is going to be reduced.

This seems likely to cause the government to be unable to sell new gilts to plug the deficit between government income and expense.

Stephanie, what on earth is the relevance of your post? Nero may or may not have fiddled while Rome burned, but if he did then this navel gazing of yours must surely be an equivalent activity.

It is obvious to me that we are out of recession and the ONS has it wrong. The figures do not add up. They are the ones out of step. But this does not matter. What matters is our yawning budget deficit. Have you noticed Stephanie?

Furthermore, we are printing money to cover the gap. Have you noticed this Stephanie?

You are the economics guru. I only have a first degree in the subject. What tin opener are you assuming such that these huge structural problems are as nothing compared to the accuracy of suspect ONS figures?

This is intended as reality therapy for you. I respect you, but wish you would leave this nerdish subject to the nerds and concemntrate on the big picture.

When are any of you BBC pundits going to start to factor in QE or more to the point, the lack of it when the money supply dries up?

Only when this government cuts up the national credit card will you get a true picture of the economy.

Not you, not Robert nor Nick will comment on this.

I am worried.

Because until you do, we are all living in fantasy land.

So the new party media line is: announce it to the plebs that the end of the recession, is that so Stephanie?

24. At 6:54pm on 04 Dec 2009, Robiati wrote:
UK Govt. debt is currently 59.2% of GDP.

financial sector intervention and pension contributions and private finance initiatives PFI which the government are obliged to pay. The Centre for Policy Studies (note - at end of 2008) argues that the real national debt is actually £1,340 billion, which is 103.5 per cent of GDP.

The REAL national debt is well over the total economic output.

The devil is the detail, my friend, unless the detail was intentionally omitted.

Surely something of interest is going on; we are having 'revelations' about the true state of the Banks every 5 minutes it seems, things that Government surely would want to bury very deeply in the normal course of events. So what is going on? Is Brown now realising, like Hitler, (and Charles 2nd I believe) that all the little battalion markers no longer represent real battalions, are all his Lieutenants in the process of trying to save themselves? I've absolutely no idea, but there seems to be an awful lot of telling, if no kissing going on.

Corus is another chapter in the story of British manufacturing's long term decline documented this week in the Financial Times. Under the (much maligned) 18 year Conservative government 1979 to 1997, manufacturing fell from 25.8% to just over 20% of the economy.

Under the present government, in only 12 years, it has fallen from just over 20% to 11%!

Rather charitably, the article's title is Manufacturing fades under Labour

The British government is insolvent, but nobody is talking about it. The Bank of England has printed over £7,000 per tax payer this year!

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

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

Stephanie, Stephanie, come now, we know you have to make a living and you do so admirably here and elsewhere.

But don't you see, it's all smoke and mirrors, (banks 'flipping' bonuses for huge pay increases) now you see it, now you don't (the-dreamed-of-recovery).

Instead of lobbing out these red herring (plural), don the mantle of Accuser and have a go at the avaricious wretches that are threatening resignation if they are disbarred from awarding such mind-boggling bonuses, after we, the tax-payer, became liable for 84% of their debt.

Moreover, they still hold these monies close in hand while potential house purchasers go empty handed and some poor families have their front door keys repossessed. How does that churn in your mind's eye if you put yourself in that ghastly situation?

But then it only happens to other people........doesn't it?

There is a lot of informed debate in your pages and I like to read about the inscrutible machinations that colour our economy, but I am just a financial 'illiterate' so I just thought I'd 'lob a banger' into the room and close the door...........

Good Evening.

And here's another piece of sophistry by the BBC
Taxpayer's bail-out of banks 'justified', says NAO

Whereas what this guy actually says is that he does not for sure what is better:

"It is difficult to imagine the scale of the consequences for the economy and society if major banks had been allowed to collapse," the NAO said.

And how can he draw any precise conclusions when he himself admits
It said that the final cost to the taxpayer will not be known for "years".

The BIG question is why does the BBC reports in a misleading way. Who sends the directives? Who's the REAL boss?

#24 Robiati. Perhaps what is the great surprise are your thought processes. Where to begin?

Who says government debt is 59.2% of GDP? Certainly not Soc. Gen. as they say it is 105% of GDP. But what is an almost 100% error between friends?

What is the position of the UK in global terms? Could it be relative? Could it be anything else? So global meltdown is in progress and you discover relativism. Excellent. Global trade has declined by about 15% at a rate of decline that is almost double the rate of decline witnessed in the Great Depression - but the UK is doing better than some. Having preemptively smashed its manufacturing export base could it be in any other position?

Who would want to make you sick by only talking of the downside? Perhaps we do live in a democracy after all. Who cares about people that have lost their jobs, when all of this can be wiped away by statistical mendacity. Look at how US unemployment is falling - look at the failure of part time working to decline and look at the inanity of the birth death model. Oh no let´s not look at these things because it might not provide answers that you like.

Private debt thats the problem. All those poor people who so effortlessly outwitted the Investment Bankers and made them lend money to people that could not repay their debts. So how come Investment Bankers who are stupid (they must be to have been outwitted by poor people) now need multi $ million bonuses to prevent them from plying their trade elsewhere. Hmmm. Doesn´t quite make sense somewhere does it?

Unless of course you are an Investment Banker who has recently retired to Fantasy Island.

Hmmm.... now let's see : the economy shrinks by 10% over five quarters, then they fiddle the figures for the sixth quarter to show 0.1% growth. In reality that means the economy is now operating at 90.09% of what it was doing a year and a half ago, but everything's OK now. All thanks to that economic genius called Gordon Brown. Caledonian Comment

You have to be careful not to behave like a Government cheerleader steph, the article sounds as a desperation to see a step out of recession on whose behalf ? The country would like it to be so but only if it is true. The treasury clearly so but for electoral benefit as much as on behalf of the country. You appear to be in danger of mixing with your sources of information too closely and taking your viewpoints accordingly, a danger that anyone associated with the Westminster village must be wary of.The BBC really must be impartial or it is nothing of benefit to the community.

Another shocking piece of propaganda by the BBC (I am a very strong supporter of the BBC, when it does the impartial job it is supposed to do) It seems those on fancy benefits just want to mask the truth ! We have jobs being lost by the day, millions on benefits, many of those disguised in various formats, and Companies stretched to the limit. Christmas and the cost of extended close downs will exasperate the corporate carnage and deluge the poor private sector workers with more grief adding to their escalating utility bills, tax payments, NI payments, petrol and the outrageous Council tax increases. Just where does Stephanie think these people are going to obtain their funds for unfettered spending ? Britain is in a Brown induced financial meltdown !

I feel so much better now, thanks Steph. However, try reporting the news facts and not speculation within that glorious insulated BBC ivory tower. The economy is a mess, the sooner we accept the fact, the sooner we can start fixing it.

Economists are like generals; they are always well prepared to fight the last recession again.

Europeans are slowly sliding down the prosperity pole, and it's something we haven't experienced in centuries, don't tell me we know how to handle it. I have just listened to an ex-British Steel trained electician tell the Today program how he was train by that company, where do we get that sort of world class training now?

This recession will probably not be a knockout blow, but it's certainly another nail in our coffin.

If I can paraphrase Milton; Now I see, booms to corrupt, no less than busts to waste.

GDP is up?

I wonder whether the UK follows the US model (as disclosed by Peter Schiff) whereby the production of US factories relocated to the third world is still counted in government statistics as US GDP...?

In North Wales I know of at least four factories of 300-500 workers each that have been closed and relocated: (incl. an airline seat factory gone to China and the UK's last washing machine factory gone to Czech republic) and numerous small businesses that have closed all but their core business in the big cities. We may have stopped falling but until those jobs return we certainly can't claim to be rising.

It absolutely astounds me, the preoccupation this country has with housing/construction, treating it as the bell-weather of the UK economy! It has turned the country into a casino! The country needs a broad-based economy not a consumer led Las Vegas. How can you complain about the bankers when the majority wish to return to the credit subsidised Bacchanalian fest of the last ten years. Can somebody out there please talk some sense!!

We hear about less bad figures as though they are good, meanwhile Corus downsizes, why does Nero spring to mind?

#35 & #44
Both highlight what in my mind is really happening. What we are experiencing is the collapse of a US/UK economic model that demands short term capital gain traded against long term social decline.

Hers's a common example of what's accepted, witout question, as finacially healthy business practice: https://www.guardian.co.uk/business/2009/jan/20/wainwright-burberry-redundancies-rotherham

The UK and the US are both slowly but surely sinking into long term poverty with the potential for social unrest like never before.

We have to face up to the lethal lie that we are special people who live in a *Post Industrial Age*. Sorry to disapoint anyone but the post industrial age has never existed; it is just a euphemism for *Consumption Without Production*

Demand still down, then. Dole queues still long, causing the labour market to keep wage levels down, with several hundred people going for each job. Except in banking, curiously. They need bonuses to hire people.

We should all do what they've been doing. However, massive public investment on the scale the banks have enjoyed would be tantamount to Communism, something the naturally Capitalist bankers would have us all be wary of.

We really do need one rule for us and one for them.

Is growth good? If every African was on a par with a 'Western' consumer would there not be a denuded planet and the end of civilisation!?

Stephanie
I feel that a double-dip is inevitable. Many firms have been merely surviving during the past year whilst the banks continue to refuse to lend. No wonder people are now being laid off as any reserves run out. Unemployment to rise, GDP to fall during the next year...

Can anyone explain to me why construction should even be considered as part of GDP? Building houses is a necessity, not an investment. Treating this as an asset which adds to the value of the UK is just economists' and politicians' spin, and is delusional, unless we intend ultimately to sell the UK to some other nation, with something like a lease-back deal.
Yes, it provides jobs, but it does nothing for our imbalance of payments and growing national debt.
Now, if only we could build and sell houses to be erected abroad, this would be wealth generating and would play a part in the calculation of real GDP.

Good news but how were the figures mixed up in the first place?I am worried by the way media manipulators such as Frank Luntz are given air time on the BBC.After his biased appearance on the Andrew Neil show on Thursday surely he can't be asked to appear on any serious programme such as Newsnight.The man is a Tory supporter and not an unbiased pollster.He was at Oxford with Cameron.

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

FUBAR is the word to describe this recession

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

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

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

So come on, moderator, explain why #52 was removed?

Why are are all people who deal with economics that the banks caused the problem let them sort it out not the taxpayer it should be the shareholders.

The banks should have been let to fail instead of throwing money at them t5he new pond should have been issued and let the banks have the debt we went from trading animal crops to a monetary policy we could of changed to the new pound


If they charged Nick Leeson with fraud jailed him why are we not seeing the traders bankers before the courts? They new they were in debt why did they not report it to the bosses


Bank Auditors outside auditors what were they doing?


We are now becoming the Mali of europe we do not make items to sell once we have no industry that the end


Go to stoke Liverpool Manchester any industrial city in the UK dying because we are letting industry go to China Lets ut 4000% on all goods made in china

Housing market you cannot make more money from the price of your house rising than you go to work and selling your labour in a year

Playing with figures that don't mean anything in the real world. What really counts is how much debt the government has, how much income it has and how much interest it is paying. The growth in the economy would be a meaningful figure if it wasn't so open to manipulation by government activity. Because the government is the major player in the economy, it can make one year's figures do whatever it wants. Which is why these latest figures don't mean anything. One has to look beyond these headline figures and investigate the components of the economy. Everything points the wrong way. We obviously need to reduce the size of government in the economy - and before anyone shouts at me for advocating recessionary policies let me finish - over the life time of a generation. We need, as a country, to agree that (1) government is too big and neds to be cut down to a very small size; (2) expenditure of this size is too important to be left with politicians, it has to be taken away from them; (3) government can not be allowed to fund any expenditure from borrowings. The big message from this debacle is that politicians, and unfortunately labour ones in particular, can not be trusted with our money.

46 made some very good comments, as does the person who questions where the wealth comes from in building houses. Gordon Brown said that the third sector (charities) would take us out of this recession - is he completely mad? What will take us out of this recession is making things and providing service that the world pays for. Most obviously most things the world will buy we don't make cheap enough. So the government needs to make Britain a cheap manufacturer again. Labout people may complain about treading on the workers, but without overseas buyers, in the long term there are no workers in this country.

By the way, in case people think I am a Tory and for big business: my solution to the bank bonuses is to not pay them a penny. If they want to go elsewhere let them, one or two will find jobs in other countries and companies, but most won't. The lesson that no one is indispensible has to be taught - and it looks like it will be a harsh lesson.

As many have said.. just statistics on movements and an official definition that is in itself flawed...
While we may not be on the down slope and (currently) not "recessing" further; to say that things are good and back to normal would be typical spin, we're still in the first trough of this downturn, whether or not that trough is deepening... and that's with the vast some of debt being built up on our behalf with debatable positive impact on the economy as a whole.

"L" shaped and the sacrifice of future growth have been mentioned, perhaps some analysis of our actual economy rather than headline stats would give an idea of the real position and potential future. At the end of the day its just a sum of the parts.

How can the current economic model for the UK be sustainable long term with massive trade deficits, even when propped up by financial services inflows, assets being sold off to foreign investors (thus sacrificing future profitability) and the additional cost to come due to demographic trends?

We've been living beyond our means for years, thinking we deserve more than we earn, with expectations raised beyond what is achievable by politicians encouraging an feel good factor.

Britain still has assets and historical wealth, but it needs to start using them much better before they're completely frittered and our position in the global economy is as nothing more than a cautionary tail and historical footnote.

Stephanie

Your comments were accurate right up until you omitted the bit that said:

'The growth in the construction sector was driven by a 10% quarterly rise in activity in maintenance and repair...........which includes work on public infrastructure such as hospitals, schools and roads leapt by 26% between July and September...........' (The Times)

Note volume of new work fell by 4% in the same period.

So now we know - even when the government is trying to 'cook the statistics' GDP growth was still negative.

The reason why there was such an 'outcry' over the initial 3rd Qtr ONS figures is very clear. The Government and those close too it thought that by engineering the data thorugh public spend it would lift the GDP output into growth. That's why there was so much shock and indignation.

If this was a PLC reporting its figures it would be taken apart for 'manipulating the numbers'.

The infrastructure spend may be a fine motive but it is 'artificial factor' when trying to decide whether we are on the road to recovery as an economy. It's basically just another stimulus.

Your reporting once again serves to show that you are not being 'fit for purpose' when reporting on these matters. Please report factually and independently.

You just create even more (rightful) scepticism and scorn demonstrated in the comments above (allowing for any 'la-la land, head in the sand 'it's not that bad' types).

Why the relentless focus on comparisons with last year.

If something drops to 10% of its former value then rises to 11% you can easily say it has risen by 10% (recession over etc.) but it is still at a fraction of its former value.

Car figures are a perfect recent example - a rise of 57% - but against a period when no-one could get credit, businesses held their breath until they knew what was going on etc.

Figures against last year are worthless - they need to be compared over a longer, more normal time period.

They are being used by Labour as a cheap way of telling everyone things are improving, the recession is over etc. Don't fall into their trap - or are you part of the conspiracy?

Since I've always argued that we should accept the Springtime forecasts of the Bank of England and HM Treasury that the measures taken in October 2008 and in March would turn our economy around in late summer, I'm delighted that those two institutions are now forecast to be probably right. It's welcome news we shall get with our Christmas puddings. True, both under-estimated the depth of the slowdown - HMT by more than BoE - but both thought the central forecast of a late summer start of recovery reflected the timely and prescient precautions they were each making.
This is politically charged. The Tory claim is that most of those precautions of immediate tax cuts for the masses, increased benefits for low income households and large-scale buy-ins of government bonds would be INeffective in preventing a slide. That Tory forecast turns out to be seriously untrue, and even mischievous.
Interestingly, most of western Europe, and the USA, abandoned their own scepticism this year and followed Britain's policy lead. Just as the US switched from buying up "troubled bank debts" to re-capitalising them as Gordon Brown had introduced in October 2008. J M Keynes would be amazed and delighted!! But then Keynes had also gone on to the US and helped them found the IMF and the World Bank to ensure stable post-war economic conditions.
What we don't need now is an emergency budget during the coming summer to turns us back into the Depression the Tory plans would bring. Just as those 1930s cuts caused the depression of the 1930s and the mass unemployment and social divisions that were only halted by a massive world war.
Let's stick with current cautious policy that's working. Not lurch into massive lay-offs and worse.

"Statistically speaking, a decline of 0.1% is really no decline at all. It's also not far off what many independent economists were expecting when that first estimate came out on 23 October - and caused such a shock."

I read three reports in the two to three weeks prior to the last GDP figure that predicted we would still be in recession. Do you read the papers - or do you just listen to the spin from your banking chums? Quite frankly, it would have been a shock if we had come out. There's a very obvious correlation anyway between the Countries with the biggest housing bubbles and those still in recesion.

What's the point of this nonsense anyway? - if GDP swings to 1% annualised for the next quarter, then -1% the next and keeps doing that for the next decade, but with unemployment constantly at 3M, then we will have avoided recession for the next decade, so everyone will be happy presumably? Wake up.

There seem to be a lot of negative comments here about the various stimulus packages and how they don't appear to have done much for the economy if all we're doing is flatlining. People seem to be forgetting how bad things could have been if it hadn't been for the various stimulus packages.

Taking the VAT cut as an example, the impact on each trip to the supermarket is negligible. But if you add up all the various purchases made since the rate was cut to 15%, the average household has benefited to the tune of around a thousand pounds. It hasn't been a noticeable impact because of the way it's been drip fed, but most people who are finding things tough right now and complaining about the government doing nothing for them need to ask themselves how bad things would be if they had £1,000 less in the bank this christmas.

That money has had a knock on effect throughout the economy as well. Because people had a little more breathing room they won't have cut back as drastically as they could have. More goods would have been bought, and this would have kept many businesses afloat this year, which in turn kept many in their jobs.

The argument that the stimulus has done nothing is a false one. The markets will fix themselves over time, but surely the job of government is to do what it can to smooth the impact of such a massive market correction on the people of the country. In that respect they did a good job on the whole.

As to Steph's final point regarding the 1700 job losses in Redcar, why doesn't the government agree to buy six months worth of steel from the plant and warehouse it until the market picks up. They can then sell it on at a profit just like they hope to do with the Banks. If the plant is not economically viable, then it has to be shut down, but at least it will smooth the transition for the people in the region and give them time to find other employment.

64 leftie,

I wondered who on earth would consider voting for Labour at the next election. I even googled this very question earlier such was my interest. Now I've found you!

Please believe me, "the current cautious policy" is not working (if only it were!). What the UK needs is truly radical reform across the board and unfortunately I don't see anyone with the vision to deliver it.

Stephanie

I noticed that on Radio 5 live this Sunday morning you said that whichever party wins the election they will have an emergency budget shortly afterwards.

Which means that if Labour wins the election, despite having a budget in March, they will need an emergency budget after the election. This is presumably because their budget before the election will be an electioneering budget and the required tax increases and spending cuts will not be announced until after the election. Is this what you are saying?

The car scrappage scheme has mainly helped foreign car makers and their foreign owned dealerships out. While adversely affecting the trade of small car repair firms and MoT stations many of these have or are going out of business.
I feel the old chestnut of unemployment is the key, particularly sad with the young who have driven much of the consumer based boom and helped to sustain things in recent years. Sadly over 103,000 of our 16 to 24 year olds have been claiming jobseekers allowance for more than 6 months. If you add the number of young people in “training” and receiving EMA along with other benefits, there is most likely to be over 2 million 16 to 24 year olds being “supported”.
An interesting point with Education Maintenance Allowance the young people can get EMA without the need to attend College or School! https://www.connexions-leics.org/money/ema.asp Perhaps a more focused YOP scheme would help Mr Brown? Silly me, I forgot there are few opportunities now except for the climate change sector or banking.
The New Year will see a raft of bad news as the dead cat bounce of the property game finally plays itself out. Corus might have hit the headlines but it’s the likes of the 2500 or so people who worked for Threshers multiplied all over the country that’s the big problem, their reduction in discretionary spend will have a roll on effect for all.

# 64 Leftie

Interesting that the slowing of the decline is "politically charged" and yet the rest of the world seems to be coping better than the UK, whereas the downturn was due to "global factors".

The expand the money supply through cheap credit and channel inflation into asset price speculation (especially housing) to create the illusion of wealth economic model, has been proven to be the sham it was and in the meantime our underlying economy has been crippled and burdened by excessive regulation and an overblown and unaffordable public sector to enforce it.

Excessive expenditure on vanity projects and giveaways to try to keep interest groups sweet is not investment in the economy, but could be considered as investment in trying to buy political capital.

#66 - Andrew Measor: "...the average household has benefited to the tune of around a thousand pounds."

I find this figure hard to believe. Surely, don't you have to buy £40,000 of VAT liable items to make £1000 saving?

40,000 x 1.175 = 47,000
40,000 x 1.15 = 46,000.

Also, many items are not liable to the reduction such as energy bills with 5% VAT. Most food is 0% rated. Also, I think they have increased the fuel duty to compensate for the VAT reduction, so you don't make any saving when you fill your car up. The average family will have made nothing like the saving you suggest.

Looking at it another way - the cut is said to have cost the Government about 12.8 billion. If you divide that by roughly 20 million households, you get £640 per household. But the VAT is paid by businesses as well, so the household figure will be less than £640.

Your idea about the stockpiling of steel is also a bit questionable - different steels are made for different purposes. So if the steel was for making a building, or a bridge or a ship, that would be different from what you would need to make a car. How would you know what your next customer was going to want?

Sorry to be negative, but we need to get a true picture in order to know the right thing to do.

#71 croydo

You need to examine how VAT works. The article or service goes through several stages where the tax take can be increased before the end user is lumbered with the full amount. Not all value adders in the chain are registered, and several who are apply VAT on such things as disbursements and zero-rated ingredients.

I don't know what the average accumulative factor is (any super-googlers around?) but it would be a sight more than .025% of the end price.

Message 66

Nobody doubts the effect the various measures of the government have on maintaining some sort of economy in the UK.

What I have difficulty with is this seemingly endless pressure on everyone to say that recovery is just around the corner. People like me have seen a number of recessions throughout our working lives, and even before that in some respect, and we know what economic recovery feels like. This does nor feel like an economic recovery: it is just Christmas.

This government has so far done a great deal in protecting its client base within the public sector from the effects of the recession. In that this has helped to keep unemployment down is not necessarily a bad thing but it can only be a temporary measure. Tax receipts have collapsed and public borrowing has gone through the roof to the point that it is no longer sustainable and some cuts in state spending are now needed.

My expectation is that recovery, that is evidence of self-sustaining growth will not be possible for a number of years. This is not doom-mongering: it is facing realities.

The issue is that so much money has been expended supporting the banks that there is nothing to spare for the both the state sector and the real economy. Without the real economy achieving an improved performance the outlook is dire. The only way the government can help the real economy is by cutting taxes and encouraging investment. This will in turn cause its own difficulties within the public purse.

This is not a fiscal balancing act that this government with its love of a big, centralised state can in any way achieve. The size of the state, which includes local authorities, has to be significantly reduced to fit the available resources. This will also create immense difficulties for an incoming Conservative administration as Cameron and Osborne will also have to go head to head with large and ambitious local Tory councils.

Our problem is that most of the political class are not even aware as to the full nature and size of the issues now in play.

The simple fact is a recession wipes out businesses without a strong operational base. Such businesses trade, often with some difficulty, when things are relatively bouyant. Come a downturn and they are in trouble, volumes drop and overheads remain. Many are dealing with too few customers, too much of their output going to one customer or a group of a few customers. Redcar, is such an example, and was always vulnerable with 80 percent of output going to one cartel. In this situation a the employees in the business are to all intents and purposes working for the cartel, who do not have the same motivations as a business owner. There are further businesses, both large and small in the UK like this and their future is continued vulnerbility. In Redcars case the cartel walked and the collapse of Redcar followed. This is simply bad business strategy.

As a fair bit of business activity has left the UK for cheap labour areas - manufacturing dropping from 30 odd percent of GDP to about 6 percent over the last 4 decades. The solution has to include new ways of working, green taxation on transport costs inhibiting importation and looking for new markets. Unfortunately it is questionable that the employees released from the old industrial activities will be an easy fit into a new environment.

In straightforward terms every worker made unemployed in this recession also inevitably means a public sector worker, or subcontract worker to the public sector, in whole or part being placed at risk, as the private sector worker instead of providing income to to HMG is now taking benefits. This impact has yet to materialise and is scheduled for mid 2010 onwards. Any idea that this game is under control or finished, or stable, is wildly optomistic.

The issue of the young, who keep being delivered by the education system, into a job market with no jobs is a very fundimental problem, which as usual, is not recieving any balanced sustained scrutiny. This is a timebomb.

#72 bill

So are you saying that the average family has saved £1000 this year from the VAT reduction?

What is the relevance of your 0.025% figure? Show me the money!

#71

Fair point, my number may have been an overestimation, but even if it was as low as £500 a household, that would still make a difference to people if they didn't have it. We can speculate over the exact figures, but we won't have the final raw data for a few months yet, by which time the exact figure will be a moot point anyway.

What I was trying to get across was the fact that a lot of people have benefitted from that particular stimulus package without realising it and we'd be a lot worse off without it and others. The government has done it's job by trying to smooth things out and reduce the impact of the downswing. Again as with all retrospective statistics, there's no way of knowing how bad things could have been without the stimulus, but we would all be worse off without it.

I like many others agree that New Labour let the banks get away with murder by not regulating against their buying into the derivatives market and allowing themselves to be exposed to people with no income, no job and no asset not being able to pay back their loans. Also It's amazing that the regulators allowed anyone to get a 125% mortgage. Just as they are intervening in the market to help people out, they should have acted to prevent the bubble from occuring in the first place.

I fully expect New Labour to get what they deserve in the ballot box next May. Their only hope is that just like in 1992 when the nation couldn't quite bring itself to vote Labour back into power, rightly or wrongly, the nation will feel the same way about the Conservative's.

As to my point about Corus, it was just an example of how the state could intervene to help smooth the transition. Whilst I'm not an expert, I'm assuming whoever oversaw my idea should it ever happen would be, and would have a better idea about what types of steel to stockpile.

Someone pointed out the fact that more jobs were lost through the closing down of Thresher's which is a valid point. However, whilst it's a tough time for the individuals involved and they may not appreciate it at the moment, it's a lot easier to find new work within the retail sector as they have transferable skills. In the case of the Corus workers, it's a shame, but it does appear that steel making in the UK is not viable any more and the specific skills they have aren't as easy to transfer. Surely giving the staff an extra few months employment via government intervention will give them the time to adapt and learn new skills so they can move into other types of employment. Even if we make a few million loss on the actual steel itself, surely this could at least be partially offset by the fact that the workers and the other people in the supply chain who'll be affected will still be paying tax rather than claiming benefits.

0.1% growth/0.1% contraction... it doesn't matter. If there were growth it is just "bubble growth" bought by borrowing. Any fool can borrow money and pour it into an economy then point and say "look we have growth back".

Any fool can believe them and clap their hands and say what a great job has been done. It all smacks of the Emperors New Economy.

The "underlying rate" is still downward I suspect, and will be for some time yet. Only when the economy changes structure will any genuine growth return. My guess is that will take a decade.

Since I've always argued that we should accept the Springtime forecasts of the Bank of England and HM Treasury that the measures taken in October 2008 and in March would turn our economy around in late summer, I'm delighted that those two institutions are now forecast to be probably right. It's welcome news we shall get with our Christmas puddings. True, both under-estimated the depth of the slowdown - HMT by more than BoE - but both thought the central forecast of a late summer start of recovery reflected the timely and prescient precautions they were each making.

This is politically charged. The Tory claim is that most of those precautions of immediate tax cuts for the masses, increased benefits for low income households and large-scale buy-ins of government bonds would be INeffective in preventing a slide. That Tory forecast turns out to be seriously untrue, and even mischievous.

Interestingly, most of western Europe, and the USA, abandoned their own scepticism this year and followed Britain's policy lead. Just as the US switched from buying up "troubled bank debts" to re-capitalising them as Gordon Brown had introduced in October 2008. J M Keynes would be amazed and delighted!! But then Keynes had also gone on to the US and helped them found the IMF and the World Bank to ensure stable post-war economic conditions.

What we don't need now is an emergency budget during the coming summer to turns us back into the Depression the Tory plans would bring. Just as those 1930s cuts caused the depression of the 1930s and the mass unemployment and social divisions that were only halted by a massive world war.

Let's stick with current cautious policy that's working. Not lurch into massive lay-offs and worse.

To Andrew Measor #66 and #76

Obviously we've had a couple of excellent contributions providing a little more guidance to your earlier comments.

I believe the impact of the VAT reduction has been well overstated. Most household spend (after housing costs) goes on food and energy. These, as has been pointed out, are either zero- or reduced-rated.

The 2.5% reduction is a pretty negligible margin on an average purchase of say £20-30 (on an average item). It's about 50p.

It's hard to imagine any real benefit. It may be of some benefit to the poorest but by definition this category will not make any difference in the grand scheme of things.

If a section of society thought that buying big ticket items from say washing machines to cars may save them some money (about a tenner on £500 item - wow!!) and then all's we've done is brought tomorrow's 'recovery' purchases forward which is not that clever.

Then there's the cost to retail operations in having to change things twice. (Consider - am I going to buy 2 £50 coats instead of 1 to save £2?) which is what the retailer really needs. I don't think so. Neither as a family have we said 'oh - let's go out for another 'eat-out meal' as we can save £1. As far as I can see its a completely bogus argument.

Of course VAT reduction was useful for charities and public sector organisations in terms of costs (as VAT not reclaimable as far as I know) but they are not going to help the recovery are they?

It may have been of more benefit (if you're into short term sales) if the Government announced it was putting VAT up (as it will no doubt have to). But then that's not going to help either is it?

76 Andrew Measor

I am afraid the idea that somebody buys something with no particular intention to use what they are buying - which is the whole push of your Corus proposal, is part of the problem we are where we are. This proposal can be applied to almost anything. In terms of strategy it is a cul de sac - how ever well intentioned, which I do not doubt.

Producing something that can be made cheaper elsewhere, with no particular edge to it being made here, leads to being vulnerable. Having one customer taking 80 percent of your output is a totally ridiculous strategic position, your business is totally dependent on the whim and fortune of that customer. A further period of production of 6 months is neither here nor there, as it is remarkable the facility has lasted as long as it has.

The problem is replacing employment which requires new ways of working, and which can be defined by what functions in this economic environment. HMG is rather bad at business, that is not its role, its role is governance, and it has to improve in that area.

The situation ensures it makes little difference who is in Number 10. The drop in tax revenues, the unemployment problem, the government debt, all conspire to limit options.

I do not doubt your good will, I just do not agree the idea.

There are 1 million young unemployed. If there is a problem it is that.

78 leftie

''Let's stick with current cautious policy that's working. Not lurch into massive lay-offs and worse.''

The economy has DROPPED in size. Tax revenues have DROPPED. Public sector budgets currently are the ones set a year ago. No drop in public spending has occurred yet to speak of. In 2008/9 public sector employment grew by 2 percent. Do you think the situation is sustainable. Whoever is in Number 10 in mid 2009 will cut, it will be on a 5 year taper, thats the way they do it.

The current 'cautious policy' is 'cautious' because there is NO money. When the debt has to be reined in unless there is massive recovery in the economy, most unlikley, unfortunately, then there will be cuts. It makes no differnce who is in. Arithmetic not limited to any political party, hopefully.

78 leftie

''Let's stick with current cautious policy that's working. Not lurch into massive lay-offs and worse.''

As I said in my post, that is talk of the Emperors New Economy. The policy is not "working". At minimum it is postponing a meltdown (perhaps till after the general election). At worst it is preventing the genuine actions required to repair the mess created.

The UK economy is doomed until all realise that banks do not "create wealth". They create nothing, merely move money from place to place and take a cut. There is no creation of any true GDP from it.

As long as the economy is geared towards "service" and not manufacturing and primary industry such as farming/forestry then the decline in the UK fortunes is inevitable. Don't think it can't be done, look at Germany for a more balanced economy.

For this to happen requires a fundamental rethink and long term plan, staring with educating scientists and engineers, not hairdressers and media experts. Removing red tape that exports manufacturing jobs. Perhaps imposing tarrifs (yes, shock horror).

The current plan to rebuild the bubble indicates the utter lack of understanding by the govt. of what has happened and why. They still still think the city was a "good thing" and just don't get that is was a hyena in fluffy sheeps clothing. The government still see a sheep...

#75 Croydo

No, essentially I'm agreeing with you, but the way the VAT system works, it raises more than any 17.5 or even 15%. The higher the rate, the disproportionately more the extra, so the differential of .025 would have a greater effect with a higher rate. effect

All the indications seem to be that the myth of recession is entirely located in the financial services sector. Which would be consistent with the known fact that the financial services sector went into meltdown (we can dispute the detail of reasons) and is now recovering due to massive subsidy from other sectors.

The genuine and enduring question that economists seem to avoid is: why does the general economy tolerate and, in fact, reward such dangerous, destructive and self defeating behaviour. The economic "recovery" is being driven by the general economy generating huge amounts of wealth to subsidise the banking sector.

It seems that the notion of recession needs to be rethought. Perhaps sectorally driven recessions might be the definitional way to move away from the patently absurd notions of "banks know about economics" dogma that infests business and economics blogs. Who knows, that might be the way to achieve Policies as rallied for by Post Austistic Economics.

The current recession is no longer a recession, it is the level of activity in the economy that we will have to get used to in the next 5 to 10 years. The high level of leverage in the commercial sector not withstanding that of individuals will ensure that consumption will not get back to that of 2006/2007 anytime soon (good for the environment).
Unemployment will remain high for at least 3 years and may well lead to the social unrest of the 70's. Please do not blame the immigrants for the debacle, the blame is with the present governmemnt and irresponsible lending by the financial institutions.

PM Brown is announcing with a florish a 12 Bn GBP saving. Bit less than the August 2009 government income shortfall, the shortfall for just one fairly typical month. That is the scale of the problem. A tsunami of debt.

Sorry Steph, but good news in any shape or form is not welcomed by the Daily Mail reading professional bloggers who incidentally have been untouched by the recession well except for receiving a little less interest on their nest eggs and of course the low interest rates they moan about actually help normal working class folk like me get affordable mortgages.

Any recession only really hits the manual and blue collar workers but gives the well healed something to moan about whilst they count their money.

PS The Government stimulus was much needed and the only people in the world who don’t agree with it are those telling us its time a for Bushesque regime at number 10.

https://cluaran.free.fr/debt.html

If 70% of GDP is consumption and we are fighting a war can our wealth be really growing without investing. They understate inflation anyway so that over states GDP. Money printing is just deflating debt and reducing savers spending power.

Leftie wrote:
'J M Keynes would be amazed and delighted!! But then Keynes had also gone on to the US and helped them found the IMF and the World Bank to ensure stable post-war economic conditions'.

If these are stable post-war economic conditions I'll plait sawdust.

On the VAT debate, the main reason the government did this was that they were desperate to get liquidity into the system - they were prevented from reducing VAT below 15% by EU rules. There was no pint in changing corporate tax or personal tax as these changes would have taken months to feed through. When I heard the VAT cut announced I knew then for certain how deep in the mire we are - it was an act of desperation for a government with few options at the time - however small the impact they felt they had to get that liquidity in somehow.
Anyone know what sort of steel is used in bridge building or flood defence/river management works? The key here is that once the skills of the 1700 are lost to the UK they are lost forever. It's not the scale of the lost jobs it's the skills we lose. It will also be almost impossible to re-build the steelmaking capacity should we ever need it again. Media studies graduates need not apply.

Agree with most of points on here. Stop getting stuck in the detail and comment on the bigger picture!! Or are you worried you'll do a Peston and be blamed for stirring up trouble...?

Our company has been through 5 rounds of redundancies since Nov 08, 14% salary reductions and no bonus or pay rises for two years. The prediction for 2010 is another tough year - we're construction related, so not much cheer here - just grit your teeth and press on!

Stephanie
The national economy is at or about zero growth (3Q09 growth figures revised to -0.1% GDP) but this has only been possible because of massive Government intervention - QE being the most obvious. (If) when the Gov't slashes public spending (because it can't afford to maintain expenditure levels) then it will precipitate an inevitable double-dip recession. The reality of billions of pounds of inefficient government spending being saved equates, directly, to lower employment in direct and indirect Government labour and will have a devastating knock-on effect in geographic areas and socio-economic groups. For example any significant reduction in military procurement, an obvious candidate, is likely to have a dramatic impact on England's NW, where BAe Systems is a major defence contractor & employer. So the Government will need to be extremely careful in its cuts in order to not destroy any more communities, as happened before with the mining communities (by way of metaphor for the entire heavy industry sector which has all but vanished in the UK).