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.