‘Green-shoots’ wither in UK

Written By: - Date published: 9:19 am, July 27th, 2009 - 11 comments
Categories: employment, uk politics - Tags:

Like New Zealand, the UK has had a deluge of ‘green-shoots’ news from the corporate media and the financiers desperate to jawbone the economy into recovery. The spin became so pervasive that the consensus among economists was the UK economy would have shrunk only -0.3% last quarter and would be growing by now.

It shrunk -0.8%. Oops. It’s rare for the consensus to be out by much. 0.5% wrong; that’s enough to make Treasury look good. Amazingly, the economists over there are still predicting 3rd quarter growth (they’ve been spouting the same ‘first-in, first-out’ mantra we’re hearing here, the UK was the first major economy in recession). As if an economy in deep recession can just turn on a dime. The IMF predicts the UK economy will keep shrinking until 2010.

All eyes now go to Japan, the US, and the other major economies. Predictions about growth in those countries last quarter  has also been rosy (when rosy means only small decreases) but it all seems to be based in a ‘what goes down must come up’ mentality rather than real signs of growth. Reality might be about to stomp down hard on those ‘green-shoots’.

Back in the UK meanwhile, S&P has placed the government’s credit rating outlook on negative watch for the first time in 30 years. Now, there’s little likelihood of an actual downgrade because there’s no real chance of a major economy like the UK failing to pay its creditors; none have defaulted since World War 2 (if the world gets in such a state the UK can’t pay its debt, there will be far bigger problems). Nonetheless, the Tories are playing the same game that National did here – talking up the credit rating bogeyman as a cover for cutting public spending. Why wouldn’t they? It fooled the media and, through them, the public here. It’ll probably work over there too.

11 comments on “‘Green-shoots’ wither in UK ”

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  1. BLiP 1
    27 July 2009 at 10:31 am

    Dunno what rosy predictions you’ve seen about Japan but the IMF reckons there’s still at least another two years of deflation to look forward to in that economy. Meanwhile, in the US, the pinters at the mint are running red hot pumping out make-believe dollars 24/7.

    In New Zealand and thanks to Labour, fears of over-capacity in the dairy industry, and the resulting risk of deflation in that sector have been largely abated. No one knows if the introduction of the “auction” system has been sufficient to eliminate the risk completely, and I note with alarm that the sharks have started circling.

    Could it be that the farmers – those canny bastards from the hinterland, those salt-of-the-Earth producers of New Zealand’s wealth and staunch National Party supporters will be the ones to put the kybosh on John Key’s plan to rort the nation? Well, as the Fonterra Board learned the last time they tried to pull a swifty on the cockies, our farmers know full well the value of co-operative production and ownership. Who says socialist models have seen their day?

  2. Graeme 2
    27 July 2009 at 10:41 am

    It shrunk -0.8%.

    Isn’t that a double negative?

    🙂

  3. Danyl Mclauchlan 3
    27 July 2009 at 10:56 am

    Meanwhile, good old Keynes style fiscal stimulus lovin’ China hit 7.9% growth in the last quarter.

    • Zaphod Beeblebrox 3.1
      27 July 2009 at 11:10 am

      And Australia which has kept its 4 pillars banking policy, which prevented the rise of merchant banking is hanging in there pretty well too.
      Britain which its obsession with ‘The City’ wil need to come to terms with its mistakes just as the US will need to sort out Wall St and its Credit Derivatives.

  4. BLiP 4
    27 July 2009 at 11:06 am

    Probably because the Chinese Government Statistician would be up against the wall before lunchtime if there was anything other than a positive result 🙂

    • Bright Red 4.1
      27 July 2009 at 11:20 am

      I read somewhere that they reckon if China goes below 6% it would be enough to spark major soical unrest.

      That figure Danyl is quoting is an annualised figure btw – ie last quarter was 7.9% larger than the second quarter of 2008. The -0.8% figure is quarter on quarter – ie the 2nd quarter of 2009 was 0.8% smaller than the first of quarter of 2009. In NZ, the growth is normally reported in q/q but the americans perfer annualised.

  5. uroskin 5
    27 July 2009 at 12:47 pm

    “here’s no real chance of a major economy like the UK failing to pay its creditors; none have defaulted since World War 2”

    True but the UK came close when the Callaghan Government had to go cap in hand to the IMF for a bailout.

  6. Draco T Bastard 6
    27 July 2009 at 2:18 pm

    http://www.debtdeflation.com/blogs/2009/07/04/debtwatch-36-july-2009-its-the-deleveraging-stupid/

    The present recession is tracking, within a reasonable margin, the same as the Great Depression. I wouldn’t be getting my hopes up for a recovery just yet.

    • BLiP 6.1
      27 July 2009 at 2:33 pm

      Draco – you seem to me the most economically literate one here, I wonder if I might ask: when are we going to start calling the current situation a Depression?

      • Draco T Bastard 6.1.1
        27 July 2009 at 3:50 pm

        About 6 months after we provably start coming out of a depression?

        I think the economy will continue to go down and into a depression but it may not. The massive fiscal stimulus of the major world economies may pull it back from the brink. It has a chance, a slim one, but printing huge amounts of cash usually just results in stagflation. Money isn’t a resource and it’s resources that growth* is built upon and oil (the essential driver of growth in the modern economy) is tracking back up.

        The inherent problem, though, with any prediction is that they’re only provable after the fact.

        * Not that growth is even remotely sustainable in any way.

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