UK Stagflation Worsens (Cold Blamed) After GDP Revised Even Lower, LSE Promptly Halts Trading

Tyler Durden's picture

Following a surprising confirmation of a double dip in the UK a few weeks ago, after GDP was reported to have dropped by 0.5%, today the economic growth number was revised even lower, coming in at -0.6%. Per Bloomberg: "Gross domestic product fell 0.6 percent from the previous three months, compared with an initial estimate for a 0.5 percent drop, the Office for National Statistics said today in London." Yet how pathetic would a country be seen if it didn't blame a weak winter data point on the snow: "The statistics office said its “best estimate” for the
impact of cold weather on the data remains 0.5 percent. The
slump was led by construction and investment. The coldest December in a century hampered the recovery,
dragging the economy to its worst performance in more than a
year. The Bank of England kept its key interest rate on hold
this month as inflation at twice the 2 percent target led to a
four-way split among officials. Recent surveys suggest the
contraction may have been a temporary setback, with services
resuming growth in January and manufacturing strengthening." Of course, with no additional money printing (for now) it may well have been permanent. We will need to wait until spring showers are blamed for another 1% or so drop. And it wasn't even half an hour later that the entire London Stock Exchange crashed. "Investors were left in limbo as the London Stock Exchange halted
trading due to a technical glitch, dealing an embarrassing blow to its
new systems. The LSE, which launched its new trading system last
week, suspended dealings before the opening bell on Friday morning in
the latest in a string of technical problems." Snow was not blamed: "It blamed issues with the market data technology and said it was investigating the problem." So once again, just like in the case of the Italian market a week ago, the second there is the potential for massive market volatility following disappointing data, a market wide "circuit breaker" comes in preventing anyone from selling. Truly an effective solution to retain asset price stability.

More on the LSE's travails:

The LSE's woes come at a bad time for traders, with major economic news in the UK after the latest gross domestic product figures and ongoing volatility amid the Libyan political crisis.

Joshua Raymond, market strategist at City Index, said: "It's yet another glitch to trading and traders, who still remember the same issues that halted trading for some three hours in 2009, and they will undoubtedly be venting fury this morning at the LSE.

"At a time of uncertainty in the markets, where traders are having to keep on their toes with the situation in Libya, the last thing they need is an unexpected halt to trading."

The technical troubles came in the same week that Borsa Italiana - the LSE's Milan platform - suffered a five-hour outage.

The LSE's new Millennium Exchange trading system has got off to a rocky start since being rolled out on the group's smaller Turquoise platform last October. Trading was suspended for two hours on Turquoise in November, after teething problems led to glitches on the second day of operation. It is also thought the LSE is facing claims that technical problems meant prices were not correctly displayed for some traders last week.

The difficulties present a headache for the LSE as it comes under increasing competition. Xavier Rolet, chief executive of the LSE, has led the push for new technology to improve the exchange in the face of rivalry from the likes of Chi-X Europe.

Meanwhile, the LSE has been joining forces globally in a bid to increase its scale and might. It unveiled a deal to merge with Canada's TMX, which operates the Toronto Stock Exchange, earlier this month.

In light of the ongoing exchange consolidation, perhaps it is time for Sigma X to finally come out of the closet and buy all these money losing enterprises, thereby giving REDI 100% control of the market.

And speaking of Goldman, did anyone believe the suddenly biggest spinmaster could allow a bad data point to come out without attempting to present it in some gloriously silver lining:

There were small downward revisions to output in both services and manufacturing, only partly offset by a small upward revision to construction. The latter two we knew about ahead of the release, the first we did not. 
Most of the weakness was concentrated in December. There was no sector that saw any growth that month and, at least according to these estimates, output collasped in sectors most vulnerable to the weather collapsed: activity in consumer services (leisure, transport) fell by 4%mom and the construction sector shrunk 16%mom (nsa). It seems likely, therefore, that a good part of the weakness can be blamed on the snow.
Whether the impact on whole-economy growth is exactly 0.5%pts, as the ONS claims, is quite another question. These early estimates are innacurate enough to begin with. The ONS's opinion about the impact of the weather  - and it is just that (an opinion) - can only be more uncertain. What we do know is (i) business surveys are uniformly stronger - they all point to positive growth in Q4 and an acceleration in activity in January (see the three graphs below, covering consumer services, business services and private-sector output in aggregate) (ii) whatever the true impact of the weather, it got a lot better in the New Year. We are confident, therefore, of seeing a material bounce in the preliminary estimate of GDP in 2011Q1 (published at the end of April), enough to ensure reasonable, if below-trend, growth across Q4 and Q1 together. Our current expectation is +1.2%qoq. 

And when that number disappoints, Goldman can just blame it all on lack of money printing. Just like they will soon do with the US itself.

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Josephine29's picture

Yes yet again the so-called economic experts got it wrong and the numbers were revised further down rather than up! However one analyst feels that there is a deeper message from the UK's economic figures of this week.

These figures reminded me of a section from the most recent Monetary Policy Committee’s minutes which I quoted yesterday.

Nominal domestic demand had increased by 6.8% in the four quarters to Q3, accompanied by nominal consumption growth of 6.3%, in part reflecting the VAT increase in January 2010. These were both above their average growth rates for the decade before 2007.

My point is that if nominal domestic demand is surging at a rate shown above and yet real economic growth is turning negative then the gap will be filled by inflation.

He feels that the real danger is stagflation and the figures are starting to agree with him.....

TeMpTeK's picture

"The weather is the last refuge of the scoundrels"


Pants McPants's picture

Queue the Milli Vanilli.....

pendragon's picture

as you point out it was the coldest winter in a century so you would expect there to be some impact on the growth data. this is most certainly not a temporary setback whatever the pmi data may indicate. consumer confidence is the single most important economic statistic in the UK and that is still plumbing the depths. yesterdays cbi retail trends data points to tough times in the near future.

EscapeKey's picture

Yeh, yeh, I happen to live in the UK, and we had an extremely cold patch the previous year (I was stuck in Gatwick for 12 hours waiting for my damn plane to clear), and the year before that (absolutely no traffic moving in early Feb 2009), but yet the winter is a TOTAL SURPRISE every year.

It's a convenient excuse, and that's about it.

pendragon's picture

well it's fair to make a weather allowance in this case and it's quantified. i'm not talking up the economy and nobody is hiding behind the weather because there is an estimate of its impact.

EscapeKey's picture

Given the adverse weather condition in 2009 and 2010, the economic impact on 2011 shouldn't have come as a surprise. We even escaped relatively unharmed compared to continental Europe, but that is conveniently ignored as well.

Remember this? 2010.


pendragon's picture

as mentioned weather effect is quantified so nobody is using it as an excuse. in US data that has been blamed on weather there has been no attempt at measuring its impact even though seaonal adjustments are far more meaningful so that is a legitimate whinge where this isn't.

Thomas's picture

When the weather is bad the estimates should include it. If not, they should all be fired for total incompetence. Thus, a miss is a miss.

sudzee's picture

The war on global warming has been won. Next up will be a war on the next ice age again.

Azannoth's picture

Hey you can't eat snow!

Snidley Whipsnae's picture

"Dont Eat the Yellow Snow" Frank Zappa

Byte Me's picture

Is there any way to kill the squid?

LongSoupLine's picture

sounds like a page out of a future American exchange "shut down".


"Due to market NOT going up, we have determined something MUST be drastically wrong.  All trading will be suspended until strange and unimaginable selling glitch stops."

Oh regional Indian's picture

Who, in their right mind would trade in an on-the-fly-rule-changing farce of a market like this?

Madness. Price Discovery?
So old school.
Momentum (or total lack thereof) is the new word in town.
Quicker and quicker with random swings to throw out the weak hands.


Snidley Whipsnae's picture

One is better off in Vegas. In Vegas they don't change the rules while the dice are in the air.

johnQpublic's picture


Quinvarius's picture

"The price is what Joe Stalin says is the price."

--Comrade Joseph Stalin, Moscow Brothel, Circa 1944 AD 

Azannoth's picture

In the soviet countries the price of items was literally chiseled into the products, I remember seeing pots, pans, cups, having the price impressed into them

I was like 5 or 6 then and I thought to my self what if you wanted to sell the item for a different price ? My father told me well you can't

Quinvarius's picture

I am pretty sure the US version of that involves Fed/Treasury interventions in the commodity markets on demand from big connected users.  Then they make margin calls or take losses from the printing press.  For example:  Airline A wants to hedge fuel cheap.  The Gov comes in and slams oil futures.  Oil company B can't make a profit.  The Gov runs oil up so the oil company can hedge.  Connected asswipe C gets forewarning of all interventions (Soros, Rogers) and makes money both ways.  The gov eats the losses with printed money.  I am almost 100% certain that is how we subsidize US corporations.

falak pema's picture

Unless you're with a beautiful whore like Benjamin Franklin in Paris. When he asked the brothel lady the going price it ranged from 150-200, depending on the choice of merchandise by client. As Franklin surmised on coming out from the hot house...whatever the price range announced its always 200 what you finally the girl you choose is by definition 'the special one'! That's market economics for Comrade Stalin!

falak pema's picture

The reason why the LSE has a glitch is that they recently married the Toronto stock exchange. Now the Canuck pizza pie has hit the fans and those english trader boys are driving on the left while the Canucks refuse to do anything but drive on the right. It'll take some time to sort this out. They need dual drive with reverse angle fuse/fail safety  control.

smlbizman's picture

i am just giving info....sorry off topic....right now on ebay there is no product, silver bullion or silver coinage that is available to bid were the auction is about to expire.....most are 12 hours to days away...i have never seen this before....also td amer. trde has seemed to chamge and slow down the cash side...i.e...selling a stock but not having funds immediatly avail. to use again for further trading, were not talking about w/drawling funds, just trading...there appear to be subtle changes happening...more snimal heading for the hill signs? anyone else notice abnormalities? 


sweet aced the captcha without consulting einstein

BigDuke6's picture

i've bought on ebay for years but less now - it gets more dodgy by the year and if you have a problem with a sale, they dont care - just count their money. yeah paypal is ok - i always weigh the bullion on accurate scales and care with the seller obviously

hey the uk is one country i'd pick to go totally feral before the usa.
more unemployed foreign born males standing about than the standing army....

howz it going fellas, n essex girls?

Snidley Whipsnae's picture

Here is a current Ebay search for 'replica silver dollars'... 552 items, most made in China... Why are these jokers not being prosecuted for counterfieting?

Dick Darlington's picture

It's funny how they can say the weather impact was -0,5 when they didn't even see it coming in the first place.

ziggy59's picture

ooops..they now call it a Technical Glitch (from crap Nothing but crap)

London Stock Exchange Hit by Technical Glitch



Snidley Whipsnae's picture

If you believe gov stats, or any stats for that matter, you should read this...

“Changes in consumers’ total spending power down to the last billion or less (i.e., variation of less than one-half of one percent) are reported and taken seriously. Price indexes for wholesale and retail prices are shown to second decimals, even though there have been so many computing steps that the rounding-off errors alone may preclude such a degree of precision. Unemployment figures of several millions are given down to the last 1,000s (i.e., one-hundredths of one percent ‘accuracy’), when certainly 100,000s, or in some cases perhaps the millions, are in doubt.”

Oskar Morgenstern

THE DORK OF CORK's picture

The UK had / has one of the most disastrous energy policies in the known universe - all to satisfy the host organism withen its bowels known as the City of London.

Its gifted boffin culture was almost completly eliminated by the late 70s while the London school of ecobullshit thrived on its entrails.

Any domestic wealth other then London's global extraction games is simply a artifact of the North seas oil and gas and that is running dry.

Their "dash for gas" in the early nineties is now becoming a retreat into a overpopulated stone age.

tellsometruth's picture

classic...when weather fails the spring stagflation confirmation will be blamed on the royal wedding distracting the public from doing anything...