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BoomBustBlog Contrarian Global Macro Analysis: The Overt Optimism in UK Financial Predictions Comes Back to Bite Them, Just As We Forecasted
From Reuters, by way of CNBC:UK Economic Slump Deeper than
Thought
Britain’s record recession was just as deep as we
conservatively estimated it using realistic metrics even
deeper than previously thought, and the economy could still have
contracted in the first quarter of this year were it not for hefty
government spending, official data showed on Monday.
The Office for National Statistics
left its earlier estimate of first-quarter growth unrevised at 0.3
percent, giving an unchanged annual decline of 0.2 percent.
Britain faces mixed prospects for
the second quarter, after data released at the same time showed that
services output contracted 0.3 percent in April, the biggest fall since
January.
During the first quarter, the
biggest rise in government spending since the fourth quarter 2008 added
0.4 percent to GDP growth, alongside a 0.9 percent contribution from
gross capital formation, which helped offset a drag of 0.9 percent from
net trade. Imports rose and exports fell in roughly equal measure.
The figures suggest a major rebound
in British exports will be needed to maintain growth when planned
government spending cuts take effect from later this year.
…
As part of a major annual revision
of previous quarters’ GDP data, the ONS said that Britain’s economy
contracted by 6.4 percent between the second quarter of 2008 and the
third quarter of 2009, more than the 6.2 percent previously estimated.
The ONS said that was because growth
at the start of 2008 had been weaker than first thought, magnifying
the size of the subsequent decline.
The resulting fall was the biggest
since quarterly records began in 1955 and wiped a total 22 billion
pounds off the economy — 2 billion pounds more than previously thought.
The ONS also released first-quarter
current account data, which showed that Britain’s deficit
with the rest of the world widened to 9.628 billion pounds in
the last three months of 2009, more than twice as much as expected and
compared with a surplus of 521 million pounds in the fourth quarter of
2009.
In other portions of the news…
- Bank
of England keeps rates steady - … kept its main interest rate at a record-low
0.5 … to the risk of a slowdown in Britain’s
economic recovery … 0.5 percent since the depths of
the recession in March … - Thursday, 8 Jul 2010 03:02am EDT
- UPDATE
4-Marks & Spencer sales rise at slower pace - … Britain’s retailers are
concerned that higher taxes, including … cuts aimed at
slashing record government borrowing …
British economy to lurch back into recession. … - Wednesday, 7 Jul 2010 12:43am EDT
- UK
coalition defends plans for unprecedented cuts - … that it could
trigger a second recession and a wave …
top priority is to cut the record peacetime deficit …
and the need to hold together Britain’s first
coalition …
Of course, subscribers of the blog were prepared for this since the
first quarter as we conservatively warned that the UK was 1) being
overly optimistic in its revenue projections 2) being unrealistic in the
interpretation of the effect spending cuts would have on the economy
(recession bound?) and 3) being unrealistic in its ability to actually
effect said spending cuts. The IMF and the EU also chimed in with this
unrealistic optimism. Below are the first three pages of our
subscription-only analysis of the UK’s public finances… 
UK Public Finances March 2010 (click here to subscribe):
Those who are interested in our opinion research regarding the rest of the Pan-European Sovereign Debt Crisis should click here for an all you can eat Macro-fest!
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MarketFox you are correct Sir!
The Catch-22 is that governments made up of career politicians and bureaucrats cannot downsize because they got in to office making ridiculous promises to their voting base. Term limits may help.
Unfortunately, most term limits that have been voted in, have been voted out. They didn't work very well and the Constitution is extremely difficult to amend-which is what it will take.
Term limits, like campaign finance reform, are of least potential benefit to the incumbents who must implement them. So here we are.
Let's make this simple....
The first knee jerk move by the supposed developed countries...is for their first move to make up for tax revenue shortfalls by raising taxes...thus snuffing out any prospects of new growth of any kind....This type of intelligence deserves words that are not allowed in a public forum....
............................
It will not be until the governments in the developed countries downsize in a big way...that they will have even a fraction of a chance ...to recover to the degree that they will be able to denote true growth....
And there have been no moves for these governments to get smaller....they have made every move to get bigger...just the opposite of what is required...
Regulatory capture...and unchecked implementation of academic folklore that should have never left the form of local classroom entertainment....need to be all but rendered insignificant....
...........................................
A sudden blanket rule...that would "overnight" reduce government size of the economy to no more than 10%... 15% max...would have to take place... Then regulatory capture and the American style fascism that is in place would be of lessor significance....
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Next...the exchanges need to be rebuilt for RETAIL.....worldwide direct access BATS model...fully defragged.....with basic electronic regs....and wiki style based information....The key point being a much better and fairer marketplace....
Look at the UK budget and see where the savings are coming from. Hint, it's not additional taxation.
"academic folklore... classroom entertainment..."
Nice phrases.
A pleasure to read astute posts.
I'm made curious to your retail exchanges, and what's a BATS model?
RETAIL exchanges....
What is truly lacking in terms of bankable assets and their valuations are common stocks that are supported by a more honest and trustworthy stock exchange....
The US and other developed governments are even bending accounting rules in order to help what shows up on the bank's books....
Common stocks that represent good innovative ideas can grant the most bang for actual bucks spent....moreso than any other asset class....
However when the public is gamed by dark pools and front running algos.....and other legal but illegal forms.....the public no longer wishes to participate....
What is a better form of exchange ?....A worldwide available RETAIL based exchange whereby the cost is 20 cents per 100 units...supported by 2 billion RETAIL accounts where all information is wiki based...and the exchanges are defragged ? Or what is available today....a few hundred major size accounts that have the regs setup for their own needs ?
The fact is that an exchange is just electronic time stamp software....and could be housed in any country....
Regulatory capture is so slanted in the US....perhaps the exchange should be housed in Hong Kong, Switzerland....or Singapore.....
BATS is an ECN/electronic exchange that has quickly taken market share from NASDAQ, NYSE, and the LSE.....and could deliver on nominal transaction costs.....whose technology could handily defrag the markets.....