UK Economy grew by 0.2% in Q2 2008

snowflake5 Fri Jul 25, 2008 at 07:08:28 PM GMT Print-friendly version Facebook

We have now completed 11 consecutuve years of growth under New Labour



GDP

Figures out today from the ONS showed that the UK economy grew by 0.2% in Q2 2008 - identical growth to that which we had in Q1 2005, just before the 2005 general election.

Conservatives who have been confidently predicting that we were in recession in Q2 will be bitterly disappointed. As expected, construction decreased sharply, but transport, service and communications increased strongly (by 2.2% compared to 0.7% in Q1). Post and telecommunications made the largest contribution to the aceleration. I expect this is because people are taking to ordering goods cheaply online (which requires post delivery) rather than going to town centres. Financial services were weak, but computer services were strong.

The significance of this GDP result is that New Labour have now completed 11 full years of consecutive growth in GDP - a record that no other British government has ever achieved. It's a pity that the news has come on the day of the by-election defeat in Glasgow East and thus overshadowed.

Still, whatever happens, we have set the benchmark for all future governments this century. Any government who cannot deliver eleven consecutive years of growth will be deemed a Failure.

I'm sure Tories are rushing to claim that this was all down to "favourable world conditions". Actually, world conditions in the last eleven years have been anything but favourable. In 1998, Russia defaulted on her sovereign debt, a hedge fund went bust, there was a credit crunch similar to that today and there was a capital flight out of the asia economies plunging them into recession (including Japan, whose economy contracted by 2% in 1998 and by 0.1% in 1999 - a very severe recession by any standards). In 2001 the USA was in recession for eight months following the dot-com bust and 9/11. In 2003, France, Germany and Italy all went officially into recession. In Germany things got so bad that unemployment climbed to over 10%, the highest since the 1930's.

But in Britain, we just sailed on. If it was really down to "world conditions" then the USA, Japan, France, Germany and Italy would not have experienced any recession either, seeing as "world conditions" applied to them too.

I believe we will come through the current global crisis too, as long as the Labour government is in power. We have been living in a fantastic golden age, which will come to an end when New Labour finally exit the scene. Après New Labour, le deluge.

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UK Economy grew by 0.2% in Q2 2008 | 19 comments (19 topical)

Re: UK Economy grew by 0.2% in Q2 2008 (#1)

by rosie on Fri Jul 25, 2008 at 07:48:11 PM GMT

Only a 0.2% drop until we go into recession then!


Re: UK Economy grew by 0.2% in Q2 2008 (#2)

by snowflake5 on Fri Jul 25, 2008 at 07:53:42 PM GMT

You sound like one of those Tories who are bitterly disappointed that we are not in recession.  But we are over the worst. The oil price closed at $124 today (down from $147 in early July - a drop of 15.6%). We've essentially come through.


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#3)

by madasafish on Fri Jul 25, 2008 at 09:40:01 PM GMT

Bookmarked for recession in late 2008 early 2009


Re: UK Economy grew by 0.2% in Q2 2008 (#4)

by snowflake5 on Fri Jul 25, 2008 at 09:49:38 PM GMT

madsafish - how's your oil bet going? I believe you said here that "I'm expecting double digit inflation by 2010. And a recession in 2009. All the indicators show it. A less bad rerun of 1979-80.", which implies you were betting heavily on oil prices rising further?  You must be taking an absolute pasting, given that oil prices are now falling?


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#5)

by snowflake5 on Fri Jul 25, 2008 at 10:42:03 PM GMT

That link should have been this one.


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#6)

by matt1986 on Sat Jul 26, 2008 at 12:46:32 AM GMT

Well, you're certainly optimistic, and could be right about the oil etc. - and who knows what could happen? - but I'm still a little downbeat about everything. I suspect the oil price will start rocketting up again shortly; I can only see demand for it continuing to increase around the world.

I'm not too interested in whether we are technically in a recession. I think the (excellent) American economist Paul Krugman had it right the other week (talking about the American economy, though) when he said something along the lines of: 'who cares whether we're in a recession according to official growth rates. It feels like a recession, and things are pretty bad, and people are suffering, and official statistics don't get across what's really happening anyway.' Now, I definately think we should always bear in mind the facts and the reality of growth rates, but I do think we can get a little too carried away trying to say to people who are really suffering at the moment, "well, the economy's still growing, so what are you complaining about?" I suppose I just hope we don't think we've scored any kind of victory just because, technically, we've avoided recession.

On a more general note, I'm also wary of taking too much credit for 11 years of continuous growth. I think if we take credit for the good years we can easily be accused of being the ones responsible for fucking everything up, too. And I think what we need to do right now during this crisis is to persuade people that we are not in control of things, and that this is what happens when you allow banks and other financial institutions to have too much freedom. (Incidentally, I don't think it would be a bad thing if we were unable to claim credit for when things go well. I don't think people give the government any credit for the good times anyway, and only blame it when things are bad. When things go well, people congratulate themselves, and when things go wrong, it's someone else's fault, of course.) We should be using this experience to regulate more strongly banks. That's the only way we're going to make sure the crisis we're in at the moment can't happen again. (Of course, part of the crisis is to do with high oil prices etc. which obviously we can do nothing about, but I'm talking more broadly about the economic situation we're in at the moment, which is mainly down to greedy and reckless bankers. Everything else being well, high oil prices wouldn't have been too much of a disaster.)


Re: UK Economy grew by 0.2% in Q2 2008 (#7)

by snowflake5 on Sat Jul 26, 2008 at 02:21:49 AM GMT

The US economy and the UK economy are two very different animals. The UK economy grew faster than the US in Q4 2007 and Q1 2008 (US figures for Q2 2008 are not out yet). The Americans not only have higher unemployment than us, but employment there is dropping too. By contrast our figures show employment rising. The American labour participation rate is 62.4%. The UK participation rate is 74.9%. Our greater participation rate makes our economy more stable, especially as many of the people joining the workforce are over 65, and have no mortgages and can spend what they earn without worrying. It means that the health of the overall economy is not dependent on a small number of people.

Secondly, it looks like the credit crunch in the UK is easing. Fixed rates are coming down. But in the USA they are still rising.

The oil spike isn't down to demand in the UK, it's down to demand in the USA and China. Both are slowing, and oil is declining with them. The Chinese should slow a bit more after the Beijing Olympics are over.

You mention not taking credit for the 11 years of growth - whyever not? It didn't happen by magic (else all other OECD economies would have had the same experience). I think you are simply anxious not to be blamed in case things go badly - Oh ye of little faith!. You are playing into the narrative of the Tories on this as they like to claim that the 11 years of growth have nothing to do with us, but that any downside is definitely down to us.

Well the boom was definitely down to us, and if things go wrong, that's down to us too. Voters always blame govt when things go wrong, so senseless being modest and not taking due credit when things go right!

I think that we have passed the danger point. The Halifax and RBS have managed to recapitalise. Rates on fixed mortgages are dropping, oil is dropping. Yes financial services are struggling, but other parts of the economy are strong. The official stats mentioned that computer services were strong and I can confirm this anecdotally (my hubby is in IT, he got a 12% payrise and his firm is struggling to recruit). By contrast in 2001, computer services were in the doldrums but financial services were booming. In complex economies, you always get some sectors booming while other parts are slowing. It's just that people in the City squeal particularly loudly when they are slowing, while other sectors don't have the same "voice".


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#10)

by matt1986 on Sat Jul 26, 2008 at 07:19:36 PM GMT

The government has had something to do with the economic conditions over the last 11 years or so - it has, within a very small range, steered the economy well - but not much, and I don't think there's any point pretending it has. We're thrown into these problems every now and again mainly as a result of greedy and over-exuberant bankers; the government can do a few things to help us cope with the results of this exuberance, but we're not getting at the root of the problem.

Don't you think the only way we're going to prevent these crises happening in the future is by accepting, and convincing the public, that, actually, governments are powerless in the face of financial markets? We're never going to get anywhere if we pretend government can make everything right. We're going to get kicked out of office in two years mainly because of economic conditions. There's a good chance the Tories will make things worse - they want even less banking supervision - so I don't understand why we don't make this clear to the electorate: these crises are only going to continue unless we regulate financial markets more strongly, and only a Labour government can do this.


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#8)

by madasafish on Sat Jul 26, 2008 at 06:45:00 AM GMT

Snowflake
I'm not betting on oil rising - now. Price is corrrecting..probably to $120. or maybe lower.

If it does fall further the US economy will recover quicker.

But the UK is almost certainly due for recession as unemployment - a lagging indicator - bites.


Re: UK Economy grew by 0.2% in Q2 2008 (#9)

by treborc on Sat Jul 26, 2008 at 09:17:20 AM GMT

Snowing again.


Re: UK Economy grew by 0.2% in Q2 2008 (#11)

by NB on Mon Jul 28, 2008 at 07:49:12 AM GMT

Snowflake: your faith in the Great Helmsman is touching. But:

  1. National Statistics are not accurate to 0.2%. Quarterly figures have an error of at least +/- 0.5%
  2. Pretty well no-one thinks that economic conditions are going to improve over the next 6 months.
  3. The GDP growth started under the Tories.  There is no evidence that Labour made things better, it merely took longer to mess up than many commentators supposed.


Re: UK Economy grew by 0.2% in Q2 2008 (#12)

by snowflake5 on Mon Jul 28, 2008 at 12:14:44 PM GMT

"There is no evidence that Labour made things better"

Of course there's evidence that Labour made things better - we've delivered an unprecedented eleven years of consecutive growth - something the Tories and Liberals before them were incapable of delivering. It doesn't happen by magic. Yes, Ken Clarke delivered 3 years of growth in the final Tory years (the tories were in power for eighteen years, but somehow people like to pretend the first fifteen years didn't exist!), but anyone can do that, even Dubya Bush managed it. Delivering eleven years is something else. If it was easy, the Tories would be pledging to match our record, wouldn't they?

Labour has done it by following a classic counter-cyclical policy. During 1997-2000, we kept fiscal policy tight as the world economy and domestic economy was growing fast. In 2000 for instance, our budget surplus was 2% of GDP - something last seen in the late 1940's (when co-incidently another Labour government was in power). Then in 2001-2005, when the global economy weakened and the USA, France, Germany, Italy and Japan dipped into recession, we loosened fiscal policy and kept the Uk going.

George Osborne is on the record saying that if the Tories had been in power during the 2001-2005 period, they would not have loosened fiscal policy - this would have sent Britain into a recession in the same way as Germany.  In other words, if the Tories had been in power, we would decidedly not have had this long expansion.

I get why it must absolutely choke you to think that Labour has achieved something that no other British party has done. It makes Tories and LibDems look stupid, especially given all the predictions of disaster they have made in each of the last eleven years.

I also get why our opponents are trying to rubbish our achievement - they fear being held to our standard. Every single government this century will be deemed to be failures if they can't deliver eleven consecutive years of growth. Must be daunting for the Osbornes of the world. 

As for "pretty well no-one thinks that economic conditions are going to improve over the next 6 months" - these would be the same pundits that thought sub-prime paper was a spiffing idea, hmm? I wouldn't put any store on the forecasts from Goldman Sachs and the like - in the last eleven years, the treasury forecasts have always proved more accurate, and that's a matter of record.


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#13)

by Floating voter on Mon Jul 28, 2008 at 03:44:10 PM GMT

"Of course there's evidence that Labour made things better - we've delivered an unprecedented eleven years of consecutive growth - something the Tories and Liberals before them were incapable of delivering"

Yes, but in the 18 years from 1979 to early 1997 the tories delivered 55 quarters of growth with 14 quarters of recession / downturn / negative growth. I'll grant that there wasn't 11 years of continuous growth but it is nowhere near as black as you paint it, especially when the first 8 quarters of downturn where caused by sorting out the mess left by Callaghan's govt. The remaining negative quarters where from 1990 - 92.

 

"I get why it must absolutely choke you to think that Labour has achieved something that no other British party has done."

That's right. No other party has emptied the treasury to the point that only spiders and cobwebs are left in the cash-boxes. That's the reason that Brown continued The Great Spend - he was emptying every penny from every account he could get his hand on.

What really annoys me about the left - and I've seen it on here a lot in recent weeks - is the belief that you can simply keep spending and when the money runs out you just have windfall taxes to fill the piggybanks back up again. It is not a feasible way to operate. 


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#16)

by snowflake5 on Mon Jul 28, 2008 at 05:22:45 PM GMT

Floating voter - the downturns under the Tories cancelled the upturns. It's absolutely no good growing 2% one year and then -2% the next.  You end up less than flat.


Secondly, the point you make about debt is incorrect. See here for the details. Debt grew faster under Major than under New labour.


The national debt was £86.88bn in 1979, £192.98bn in 1990, £419.54bn in 1997 and £520bn in 2007. As you can see the fastest growth was under John Major. Indeed as the 97 election approached the national debt accelerated from 48% of GDP in 94 to 52% of GDP in 97 as Major spent to ensure a "feel-good" election.


What really gets me about the right is how they make points on what they wish was true, rather than on what actually happened. Your belief system can't cope with the idea that Labour has run up less debt than the Conservatives, so you ignore what actually happened and construct a fantasy scenario where comfortingly everything is as you pretend it is. The truly scary thing about Conservatives in government is that they actually made decisions based on this pretend/fantasy world, and it comes as an almighty shock when the real world turns out to be different... Major was an example. But so is Dubya Bush. 


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#17)

by Floating voter on Mon Jul 28, 2008 at 08:07:07 PM GMT

"Floating voter - the downturns under the Tories cancelled the upturns. It's absolutely no good growing 2% one year and then -2% the next. You end up less than flat."

Don't be silly. Anyone with even a quarter of brain could see the difference in the standard of living in 1997 and that of 1979.


"Secondly, the point you make about debt is incorrect."

I very much doubt that because I never mentioned debt. I was posting about GDP growth. Go read it again. You are (to paraphrase your own words) making points on what you wish was true, rather than on what actually was posted.


"...Labour has run up less debt than the Conservatives"

Indeed they have. They managed this by spending almost all the national reserves so we do indeed have less debt, but we also have no money left to assist in these difficult times and give more options to this govt. The truly scary thing about Labour in government is that they actually made decisions based on this pretend/fantasy world, and it comes as an almighty shock when the real world turns out to be different.


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#18)

by snowflake5 on Mon Jul 28, 2008 at 08:37:50 PM GMT

"They managed this by spending almost all the national reserves so we do indeed have less debt, but we also have no money left to assist in these difficult times "

What on earth are you talking about? Here's the reserve data from the BoE.

Net assets (that is assets less liabilities) held by the UK Treasury in 1999 were $13.1billion and held by the BoE were $92 million.

Net assets (assets less liabilities) held by UK Treasury in June 2008 were $26.3 billion and held by the BoE were $2 million.

I make that the net reserves have doubled since 1999. But in your imagination the reserves are all spent? You really make things up don't you!!!

So - let's get this straight - not only have Labour produced 11 consecutive quarters of economic growth, they have run up far less debt than the Tories and managed to increase our national reserves too. Oh, and the labour participation rate is way higher than it was in Tory times and unemployment is down.

I'm looking forward to seeing how try to spin your way out of that.  On any measure, New Labour have been the best managers of the UK economy that we've had for centuries. This is why our opponents have to resort to fantasy and falsehood to try to make their case. 


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#19)

by Floating voter on Mon Jul 28, 2008 at 11:11:04 PM GMT

"I make that the net reserves have doubled since 1999. But in your imagination the reserves are all spent? You really make things up don't you!!!"

No I don't because the clever trick has been the off-balance sheet liabilities caused by Northern Rock and PFI.


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#14)

by Floating voter on Mon Jul 28, 2008 at 03:48:26 PM GMT

"I also get why our opponents are trying to rubbish our achievement - they fear being held to our standard."

Given the current starte of Labour in the polls, that statement is a crazy one to make. This is the most unpopular your party has ever been. Your leader is the most unpopular primeminister since 1900.

The standard is pretty low. I think other parties will have trouble getting down this far. 


[ Parent ]

Re: UK Economy grew by 0.2% in Q2 2008 (#15)

by madasafish on Mon Jul 28, 2008 at 05:05:21 PM GMT

I could sympathise more with LAbour BUT:
the country is overborrowed.
much of the poulation is overboored
and
of course the Labour Party is overborrowed.

Anyone notice the connections.
When you can organise your own finances as a party, I'll listen to your economic rhetoric.

But at present none of it is bourne out by your own pArty performance. if it was not for the Unions and a few millionaires, the Party would be like John Cleeses's parrot.

As for apres moi le deluge.. can I point out the trend of GDP growth is pointing torecession in Q4 2008.

As for economics, you should read Roger Bootle of Capital Economics. he has bene correctly forecasting this mess for years.
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/07/11/cnmoney111.xml


That man Darling forecast 2.3% growth for 2008 - says it all...




UK Economy grew by 0.2% in Q2 2008 | 19 comments (19 topical)