Vocal Voices

It seems my grumpiness is still not over.

Perceptions. UK ingrowing idiocy in other words.

I read this article and was inclined to do a little checking and comparison. Because 4%, year on year, is about the maximum we could expect a controlled expansion of the economy to sustain. It we were to hit 8% the BOE would be rising rates and rising them sharply to 5% or more. Consider the impact to mortgages. The disaster for people who thought 3% mortgages would last forever....

I did a small comparison. It is expected that the long term growth for the Eurozone is going to be fairly flat for the rest of the next 10 years. So if the Eurozone remained flat and the UK grew at 4% or, more likely, the Eurozone sits at 1% and the UK at 5%, what would the impact be?

Well it would mean the UK GDP would be larger than Germany at the end of that decade. In fact, if it continued, it would be larger than Japan and the 3rd largest in the world in just 19 years. Japan and the Eurozone remaining fairly static and the US/Asia growing around the same pace. Japanese GDP fell sharply in 2013 and continues to be fairly flat. So it's not that much of a supposition.

4% is NOT a disaster.

Also, looking at June, German output dropped, France fell back into negative growth, the Eurozone quarter on quarter growth will only be 0.3% to 0.4% compared to 0.2% in Q1. contrast the UK at 0.8% in Q1 and possibly 0.8% again in Q2. Fully 4 times the growth of the Eurozone in Q1 and at least twice the Eurozone growth in Q2. Also, it seems, German manufacturing back orders kept Q2 growth high but the orders fell in Q2 meaning that Q3 growth for Germany and the Eurozone will be lower than expected.

Let's face it. 4% is VERY GOOD. 3.7% for a year is also VERY GOOD. We would not want to grow any faster. If we hit 10% GDP growth, inflation would probably rise to as high as 15%. Meaning very high interest rates. Fast growth is BAD.

So why does the Guardian post a "The sky is falling" post on the economy? Because it looks bad for the government.

My ire continues.

UK GDP is not running at anything like 4% it is something like 1/2 to 2/3 of that.

NIESR’s latest quarterly forecast (published 9th May 2014) projects GDP growth of 2.9 per cent per annum in 2014 and 2.4 per cent in 2015.

The reduction in growth, as per the article, is only in one particular, but very important, sector.

The weak manufacturing performance in May dragged the annual rate of growth in production down to 3.7% from 4.3%.

Not that it matters much, as growth, whether it be by sector, national or global, cannot continue unabated. GDP is a crude comparative and one day everyone will have to live with, and manage, its fall into negative values. The fall will be real regardless of any new maths dreamt up to manage the figures by economists. It hopefully will not happen in my lifetime, but I would take a gamble that my grandchildren will have to deal with it.

See told you I was grumpy. Unwell, off work, sick, bored.... etc.

But, the situation remains the same. 2.9% is close enough. I doubt 2.5 in 2015. Things continue to grow outside the Eurozone and the UK continues to market outside the Eurozone more than in it. It's like my weather app on my Samsung phone. It will give reasonably accurate forecasts for 5 -7 days, but the month - 6 weeks forecast makes no allowance for the changes of the seasons, just more of the same with a slight uptick. It's almost always wrong...

The point is the tone of the article. Britain is growing faster than any G20 country. So why the gloom? Even if they don't like the coalition, it is still good news for the UK and it is still 2-4 times what the Eurozone is seeing. Also the £ is climbing. As GDP is always compared in $, the UK grows even more. Every reasonable sized business which exports hedges up to 6 months on currency fluctuations and balances prices/profit in that timescale. So it is nothing like it used to be for currency climbing...

Do they want more? I don't think they will want the consequences. Just check out the annual % growth in the 1980's and compare interest rates....



interestingly the compounded annual growth from 1948 to 2012 is 2.6%.....