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UK Stagflation Pervasive: Industrial Production Plummets By Most Since August 2009

Tyler Durden's picture


Stagflation: meet economic collapse. The UK basket case is getting very, very ugly, with today's obliteration of Industrial Production putting in doubt expectations of a BOE hike. From AP: "British industrial production fell 1.2 percent in February from
January, an official report said Wednesday, marking the largest monthly
fall since August 2009 and far worse than analyst expectations for an
increase of 0.2 percent.
The Office for National Statistics said a
7.8 percent drop in oil and gas extraction was the main reason for the
fall, while the manufacturing sector was flat." And the winner: "It may be that the industrial recovery is past its peak," said Samuel Tombs, U.K. economist at Capital Economics. Industrial production accounts for 17 percent of British GDP." That's the bad news; the good news is that with runaway inflation which is now surging at 5%+ the economy has got to be improving: after all where would all this demand be coming from if not from some massive latent recovery. Oh wait, what's that you say: endless liquidity? You don't say. Well, never mind then. In other news GBP crosses get obliterated as rate hike expectations are put on hold. In fact what you can put on the front burner is more money printing, both at the BOE and the Fed because central banks are so much more adept at "controlling" inflation than deflation.

Not even Goldman could spin this data. From Goldman Sachs:

BOTTOM LINE:  Headline industrial production was much weaker than expected in February (-1.2%mom versus Cons: +0.4%), driven by sharp falls in oil and gas extraction (-7.8%mom) and utilities output (-2.1%mom). This lowers our 'bean count' for the ONS's Q1 GDP data from +0.8-0.9%qoq to +0.6-0.7%qoq, but the uncertainty surrounding the preliminary Q1 GDP data remains substantial. Manufacturing output (which excludes utilities and energy supply) was unchanged on the month. This was also weaker than expected (Cons, GS: +0.6%mom), but the downside surprise was smaller than to overall IP.

1. Both headline IP and its manufacturing output component surprised on the downside. The larger surprise in the former was driven by a sharp decline in utilities output (-2.1%mom) and oil and gas extraction (-7.8%mom) - both of which are not part of manufacturing output. Taken together, the components of this morning's release push our Q1 GDP 'bean count' down from +0.8-0.9%qoq to +0.6-0.7%qoq (Table 1). Construction output for February is released on Friday and this will be the final input into the Q1 GDP data available before 27 April. We will further refine our estimate of the Prelim GDP in light of Friday's data but, even after this, the uncertainty around the Q1 print will remain substantial.

2. The GDP implications of the particularly weak non-manufacturing components of headline IP must be seen in the context of the lower weight the MPC places on them. In assessing the underlying path of output, policymakers tend to strip out both utilities output (because it is volatile and largely driven by the weather) and oil and gas extraction (again because it is volatile, but also because it is not very labour intensive, predominantly offshore and internationally-owned). According to the ONS, mining and quarrying experienced a seasonally unusual slowdown due to maintenance work, and utilities output contracted partly due to mild weather in February. That's not to say that zero sequential growth in manufacturing output through February is not disappointing (consumer durables output was the largest drag, registering -2.9%mom), but the downside surprise in this component is smaller than the disappointment in headline IP.

3. One would need manufacturing output growth of around ½%mom in March to surpass the Q4 growth rate of +1.1%qoq registered in Q1. As Chart 1 shows, the latest Manufacturing PMI readings remain consistent with very strong growth - around 10% annualised (more than 2%qoq non-annld).

4. A number of clients have asked us what reading of the ONS's Preliminary Q1 GDP we think would be sufficient for the MPC to hike in May? We don't think there is a precise answer to this question - much as the MPC has appeared to emphasize the importance of this release, other factors (the strength of survey data and pay deals, to name just two) are clearly influential also. That said, it seems likely that growth of +0.8%qoq would be sufficiently strong (as this is what they forecast in the February Inflation Report), while +0.5%qoq or below (implying zero growth over Q4 and Q1 together) is likely to be too weak. Our central forecast remains that the first hike will take place in May, but we will revisit this question in light of the Q1 GDP release on 27 April.

5. Also released today, the headline employment index in the Report on Jobs gave back some of its sharp February increase, falling three points from 62.7 to 59.7 in March. As a reliable leading indicator of private-sector jobs growth in the past, the Report on Jobs is consistent with private-sector employment growth of close to 2% Q1 (Chart 2). That would be more than enough to cover prospective public-sector jobs losses (0.3% of private-sector employment per year) and trend workforce growth (0.7%-0.8%).


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Wed, 04/06/2011 - 07:53 | 1140128 TaxSlave
TaxSlave's picture

Pray to God they don't run out of paper and ink!

Wed, 04/06/2011 - 07:59 | 1140138 Quintus
Quintus's picture

I should imagine that the paper and ink manufacturing sector contributed strongly to these IP results as the BoE places orders for mega quantities of new supplies in advance of the next round of QE.


Wed, 04/06/2011 - 07:59 | 1140139 Conrad Murray
Conrad Murray's picture
01000100 01101111 01101110 00100111 01110100 00100000 01110111 01101111 01110010 01110010 01111001 00101100 00100000 01110111 01100101 00100111 01110110 01100101 00100000 01100111 01101111 01110100 00100000 01110000 01101100 01100101 01101110 01110100 01111001 00100000 01101111 01100110 00100000 01111010 01100101 01110010 01101111 01110011 00100000 01100001 01101110 01100100 00100000 01101111 01101110 01100101 01110011
Wed, 04/06/2011 - 08:00 | 1140145 Quintus
Quintus's picture

Yeah, we know they don't actually print the money, but it makes for blacker humour.

Wed, 04/06/2011 - 08:23 | 1140213 TaxSlave
TaxSlave's picture

Sorry.  Pray to God their databases run on 128 bit architecture.

Thanks for reminding us.

Wed, 04/06/2011 - 08:40 | 1140252 j0nx
j0nx's picture

01000100 01101111 01101110 00100111 01110100 00100000 01110111 01101111 01110010 01110010 01111001 00101100 00100000 01110111 01100101 00100111 01110110 01100101 00100000 01100111 01101111 01110100 00100000 01110000 01101100 01100101 01101110 01110100 01111001 00100000 01101111 01100110 00100000 01110000 01100001 01110000 01100101 01110010 00100000 01100001 01101110 01100100 00100000 01101001 01101110 01101011


Fixed it for you.

Wed, 04/06/2011 - 09:28 | 1140393 Josephine29
Josephine29's picture

Actually the Bank of England gave us a hint as to its real fears yesterday.Take a look at this.

I am grateful to Bloomberg who have leaked a memo from Governor King to staff and my only concern is that it is dated April 1st! However in it Governor King promises to restrict rises in canteen prices whilst maintaining the quality of the cusine. Can you do the same for the rest of us please Governor?


Yes those non-existent food price rises are affecting the Bank of England canteen and leading to staff complaints....

Wed, 04/06/2011 - 08:02 | 1140142 Diidier
Diidier's picture

Krugman announced that.

Wed, 04/06/2011 - 08:03 | 1140147 Horatio Beanblower
Horatio Beanblower's picture


A man has himself Wednesday afternoon in the middle of the Dam on fire. WARNING: THE IMAGES ARE VEHEMENTLY. -


"He argued with anybody, everybody out of the way to go, takes a lighter and lights himself on fire," said a witness against NIS Radio1. "Everybody tried to make coats out the fire." He spoke of children he had to eat you. "Another witness said the man had called" lost everything "to be -|+Voorpagina%29&utm_source=feedburner&utm_medium=twitter&utm_content=Twitter

Wed, 04/06/2011 - 08:29 | 1140185 Sudden Debt
Sudden Debt's picture

Holland... if they don't burn themselves they'll drown once global warming kicks in :)


To bad there weren't any Belgians arround... Otherwise they would have pissed on the guy untill the fires went out.



Wed, 04/06/2011 - 09:08 | 1140331 steve from virginia
steve from virginia's picture

God bless the Irish, they quietly drink themselves to death ...

Here's the poor Dutchman on the other hand is beaten to death by passersby with their coats.

Wed, 04/06/2011 - 09:40 | 1140427 Sudden Debt
Sudden Debt's picture

Violent people indeed...


Wed, 04/06/2011 - 09:24 | 1140376 Cone of Uncertainty
Cone of Uncertainty's picture

Haha, I love it, those idiot pedestrians fanning the flames so the man can burn more efficiently!!

Nothing like providing a heightened source of O2 so the fire will burn nice and bright.

What fucking retards.


Wed, 04/06/2011 - 09:43 | 1140446 Sudden Debt
Sudden Debt's picture



Wed, 04/06/2011 - 10:44 | 1140784 MachoMan
MachoMan's picture

Stopping trying to save a burning man to tend the fire on your coat FTW!

Wed, 04/06/2011 - 08:05 | 1140151 quark288
quark288's picture

With the amount of digital money they have printed, if everyone starts withdrawing cash from the ATM's the world is pretty much going to end up with no trees.

Wed, 04/06/2011 - 08:11 | 1140176 Snidley Whipsnae
Snidley Whipsnae's picture

Fiat is made from cotton fibers, not trees...So, we would all wind up naked among the forrests...We would not be able to see the trees for the fiat...

Wed, 04/06/2011 - 08:36 | 1140246 the not so migh...
the not so mighty maximiza's picture

We will have to wear fruit like in that get smart movie

Wed, 04/06/2011 - 08:05 | 1140156 darkpool2
darkpool2's picture

so whats it to be?  keep kicking the can down the road US style (debt, liquidity baby) or try to start fixing the systemic problems the democratic system has wrought on the national finances and competitiveness. You can hit the wall suddenly with a big splat, or inslow motion ( still an eventual splat)  UK has chosen the latter, but the end result probably will not be less ugly. But please, dont think print and defer is the better solution. REBOOT.

Wed, 04/06/2011 - 08:14 | 1140186 sabra1
sabra1's picture

the elite bastards who control the banks, etc., want to improvish the world and enslave everyone! they have no intention of fixing anything!

Wed, 04/06/2011 - 08:39 | 1140251 EscapeKey
EscapeKey's picture

Don't misunderstand the elite; their interest is in collecting interest and fees. If this can somehow be combined with fixing the problems of the world, then great - otherwise, well, that's just too bad.

Wed, 04/06/2011 - 09:28 | 1140362 New World Chaos
New World Chaos's picture

A short, sharp collapse with lots of burning paper is best for us.  The NWO thinks on timescales of beaurocracy, so a drawn-out collapse would allow them to exploit the crisis and consolidate power.

Wed, 04/06/2011 - 08:10 | 1140175 Sudden Debt
Sudden Debt's picture

Who would have ever thought the Fish&Ships industry would ever decline...



Wed, 04/06/2011 - 08:16 | 1140187 Snidley Whipsnae
Snidley Whipsnae's picture

England to revert to piracy of Spanish Galleons ladden with gold bullion from the New World...oh wait...England to establish pirate fleet to hijack oil tankers on the high seas...

England does what England does best...

Wed, 04/06/2011 - 08:23 | 1140212 Global Hunter
Global Hunter's picture

and the Spanish destroyed the Incas and Aztecs for it, what goes around comes around.  Now all the Europeans have joined together, next stop African resources phase 44.

Wed, 04/06/2011 - 09:29 | 1140405 Fíréan
Fíréan's picture

in reply to :

"Who would have ever thought the Fish&Ships industry would ever decline..."


    The food chain out in the high seas and dependent industry is heavily underwater.

Wed, 04/06/2011 - 08:11 | 1140179 savagegoose
savagegoose's picture

its cheaper to print extra zeros than more notes

Wed, 04/06/2011 - 08:12 | 1140182 EscapeKey
EscapeKey's picture

The other day I got bored of the usual "tax the rich" rhetoric and did an admittedly simplistic analysis of the feasibility of doing just that to solve the fiscal problems of the UK. Executive summary - it ain't gonna happen.

Wed, 04/06/2011 - 08:42 | 1140262 samsara
samsara's picture


Liked your piece on

On peak oil, UK imports, and the economics behind it all

Wed, 04/06/2011 - 12:44 | 1141487 EscapeKey
EscapeKey's picture


I'm sitting doing some work on the pension cliff we're about to head over, which look not far off as bad as oil imports...

Wed, 04/06/2011 - 08:48 | 1140274 AdTheNad
AdTheNad's picture

How about a progressive land tax? 

Something along the lines of 0% for the first £1M of land value, 0.5% from £1M to £2M, 1% on £2M to £3M and so on.

I heard a stat that 70% of the land is owned by less than 1% of the population over here, so you wouldn't even need to ramp up the % very high to soon have substatial tax revenue.

This is what keeps our elite elite, and would help pay the costs of the negative externalities bourne by everyone else when so much land is owned by so few.

Wed, 04/06/2011 - 12:48 | 1141495 EscapeKey
EscapeKey's picture

Quite possibly, but it was outside the scope of the post...

Wed, 04/06/2011 - 08:52 | 1140291 Conrad Murray
Conrad Murray's picture

Nice work, cheers!

The US version for those who haven't seen it yet,

Wed, 04/06/2011 - 08:14 | 1140188 New World Chaos
New World Chaos's picture

Well, that's what they get for being the NWO's guinea pig.  But don't worry, the five-year plan calls for a new dawn of prosperity based on more traffic cameras, discrimination lawsuits, wheelie-bin gestappo officers, leveraged gold paper-shuffling, and heaps of child benefits for chavs, yobbos, Gypsies, and Somalis. 

Wed, 04/06/2011 - 08:26 | 1140218 Global Hunter
Global Hunter's picture

great post.

Wed, 04/06/2011 - 09:28 | 1140306 New World Chaos
New World Chaos's picture

Thanks.  Here's a couple sick jokes for you:

How many Labour beaurocrats, council snoops, shrinks, lawyers, and social workers does it take to run a forced adoption racket?  Send parents to jail for waving and sending birthday cards?
...stop kids from biking 1 mile to school?
Apocalypse Now!  Mad Max is good for the soul!

Wed, 04/06/2011 - 10:11 | 1140551 writingsonthewall
writingsonthewall's picture

Please check your sources more carefully before you quote them as gospel.

In this country the daily mail is a bad joke - it's one up from the 'Dandy' and the 'Beano'.

Wed, 04/06/2011 - 16:09 | 1142533 Bubbles the cat (not verified)
Bubbles the cat's picture

He he. V amusing. Probably lost on most here.

Wed, 04/06/2011 - 08:14 | 1140189 Hephasteus
Hephasteus's picture

Let me see. 15 percent inflation. 1.5 percent drop in gdp. That = 16.5 percent decrease.

Looks bad.

Wed, 04/06/2011 - 08:17 | 1140196 Cash_is_Trash
Cash_is_Trash's picture

Yes, that is bad. But in these times of twisted logic:

Bad ≠ Bearish

Wed, 04/06/2011 - 08:15 | 1140194 Cash_is_Trash
Cash_is_Trash's picture

Will we have a delicious dip today? Or will it be BULL MARKET?!

Wed, 04/06/2011 - 08:18 | 1140199 Snidley Whipsnae
Snidley Whipsnae's picture

Bored algos continue soaring while playing multiple 3D chess games...

Wed, 04/06/2011 - 08:33 | 1140238 Hephasteus
Hephasteus's picture

Relative to what?

We live in a world with huge inflation and shrinking gdp.

We have a huge bull market that's a bear ripping peoples arms off relative to gold.

You best define your relative boundries before asking such questions.

Wed, 04/06/2011 - 08:17 | 1140197 wandstrasse
wandstrasse's picture


Wed, 04/06/2011 - 08:20 | 1140198 williambanzai7
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Imagine you are a poor working stiff in London where prices are driven by Russian oligarchs, Arab oil princes and Bankstas...

Not a pretty sight.

Wed, 04/06/2011 - 08:29 | 1140233 Cash_is_Trash
Cash_is_Trash's picture

London's Burning...overdue aren't we?

Wed, 04/06/2011 - 08:38 | 1140249 samsara
samsara's picture

Imagine you are a poor working stiff in London where prices are driven by Russian oligarchs, Arab oil princes and Bankstas...


To be fair, Yes and No.

Has ANY country done ANYTHING in the last 30 years to change our Energy Expectations and Consumption?

Since Jimmy Carter's 'Sweater Speech'?    (Banksters Yes.)

Why are they in the bag with Russian Gas and Oil sellers?

Did they use the North Sea bonanza for the energy well being of their country?  or did they sell it as fast as they could pump it?   How about the US with the North Slope?  Did we use that to make ourselves energy independant?  Fix our Rail Systems?

I think equal blame is on the Drug User as with the Drug Pusher...


Wed, 04/06/2011 - 08:31 | 1140224 falak pema
falak pema's picture

Fish and chips will be back with a rage wrapped in greasy paper like in my young days!!

Maggie Thatcher must be wanting to emigrate to Chile!

Do you think MU will emigrate to Dubai or Abu Dhabi? Their players are already spending half their lives on their golf courses!

Wed, 04/06/2011 - 08:29 | 1140225 Caviar Emptor
Caviar Emptor's picture

Biflation spreads from US to UK. As the real economy tanks, the paper economy bloats causing inflation despite dropping demand and production. 

Lotsa Luck, British Isles! Welcome to the club. 

Wed, 04/06/2011 - 08:30 | 1140237 plongka10
plongka10's picture

The wife and I did a comparison of a shopping bill from last week versus one from 2 years ago (she had held on to it for no real reason). Prices on average have increased 35 - 50% on the staples that make up our weekly shop. 

Wed, 04/06/2011 - 08:41 | 1140257 falak pema
falak pema's picture

Bisexual biflation talk is like a fourteen antler stag buzz that the royal family tries to hunt in Balmoral with their select-few Bilderburger friends; who don't talk hot dog and hamburger talk...It's a bit like "stag...flation" gives them a hard-on about their investments in EM, where land and lithium 'calls' match heads with gold and silver bullion 'puts'. What a wonderful world to be in...metrosexual thrills of a lifetime for a man whose made the 'plutocratic club' and now wants to join the 'knights of the garter' gang...then it'll be bunga-bunga time as he will be invited to every NWO exclusive get-together where they trade 'insider talk' about their next global raid! Brave new world order network!

Wed, 04/06/2011 - 08:39 | 1140258 JenkinsLane
JenkinsLane's picture

A friend of mine has recently been looking to buy a house in the Notting Hill/Kensington area of London, (W8/W11), which is a step up from Chiswick (W4), for those of you who used to read those missives from that Goldman chap whose name I can't remember. It's prime investment banker, fund manager territory, Bob Diamond used to have a house round there. 

Prices have risen a minimum of 20% in the last six months, if not 25% to 30% in some places and I'm not exaggerating when I say that. One nice four bedroom house came onto the market at $3.08m about 5 weeks ago and there were 10 buyers after it. It went to sealed bids and sold 5 days later at $3.58m.

The UK economy may be suffering by conventional metrics but for that fraction of 1% who live in these neighbourhoods, Bernanke's put is fantastic.

Thu, 04/07/2011 - 00:59 | 1144275 DR
DR's picture

When the 99% blow a fuse, I would not want to be that 1%.

Wed, 04/06/2011 - 08:46 | 1140276 iota
iota's picture

At least we still have our political freedoms. Those are important so that the local piss artist who lives in a subsidised council house, who hasn't worked more than a month in the last ten years can post leaflets to join the 'right to work' march through my door.


I shit you not.

Wed, 04/06/2011 - 08:59 | 1140309 falak pema
falak pema's picture

I hope you don't leave your wife alone too often...

Wed, 04/06/2011 - 19:43 | 1143328 iota
iota's picture

Only when I'm busy with yours ;)

Wed, 04/06/2011 - 09:06 | 1140322 Bubbles the cat (not verified)
Bubbles the cat's picture

Glad it's still the place we all know and love: outrageous fuel/cigs/booze prices, unemployment, inflation, urban decay, stagnation etc

Wed, 04/06/2011 - 09:06 | 1140325 Bubbles the cat (not verified)
Bubbles the cat's picture

Glad it's still the place we all know and love: outrageous fuel/cigs/booze prices, unemployment, inflation, urban decay, stagnation etc

Wed, 04/06/2011 - 09:44 | 1140449 All is chosen
All is chosen's picture

Stagflation: meet economic collapse. The UK basket case is getting very, very ugly,


Really Tyler! It is not for you to comment on our glorious long-established nation, a beacon of righteousness, renowned throughout the world. WE will decide when we are absolutely FUBAR, thank you very much! AND we still have our death-defying, landlord enriching, poverty-inducing, art-driven property market --- you haven't!

I'm off to choose the hymn for the day....any suggestions? ;) :)

Wed, 04/06/2011 - 09:47 | 1140454 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

But we were told by our media that the 30% devaluation of sterling was going to be our saviour, since our export industry would drag us out of the recession,the problem of course is that in a country that imports most of its basic goods and food,the boost in competitiveness from a cheaper curreny to exporters is soon lost when your basic materials go up in price 30% shortly after,meanwhile the guvnor, Merv the Swerve then has to resort to telling bare faced lies to the British people by saying inflation is only temporary.

Well they blamed the last dissapointing dip in the economy on the weather,this time they have run out of excuses.It's about time the world realised the UK is a series of bust banks with a bankrupt country attached.More QE on the way shortly.The hopes of savers and those who have their assets in sterling of a mere quarter point rise in interest rates are dashed on the rocks of inflation to maintain the REAL British economy- the housing market.

Wed, 04/06/2011 - 09:53 | 1140470 RobotTrader
RobotTrader's picture

Industrial stocks are booming today.

Here's a company that makes fasteners.

Wed, 04/06/2011 - 11:42 | 1141177 nah
nah's picture

wohooo the banks are going to run the world... the US banks are going to run the world... the central banks are going to run the world... the globalist banks are going to run the world, FOR THE WORLD


you know property labor savings security energy media food

Wed, 04/06/2011 - 11:48 | 1141200 nah
nah's picture

just like terrorism is anything bad that happens in asia... even to other asians


life will be something you have to present to the banks... even tho the government can call you a terrorist instead of the banks

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