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5 "Tells" that the Stock Markets Are About to Reverse

UK GDP Growth +0.1%, Economy Stagnates in 4th Quarter 2009

Economics / UK Economy Jan 26, 2010 - 03:54 AM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleThe Office of National Statistics has reported UK GDP fourth quarter 2009 growth of 0.1% that brings Britain's worst recession since the Great Depression to an end that saw GDP shrink by -6.2%. However 0.1% for Q4 is not economic growth, rather it is economic stagnation at an annualised growth rate of just 0.4%.


The UK economy stagnated in the fourth quarter of 2009 which followed contraction of -0.2% for the 3rd quarter. This puts UK GDP contraction for 2009 at -4.85% on the year earlier (at -3.2% quarter on quarter basis), which is against the forecast for 2009 of -4.75% (UK Recession Watch- Britain's Great Depression?) as illustrated by the below graph which proved highly accurate. The graph also shows the economic forecast for 2010 for +2.8% GDP year on year growth as a consequence of a strong debt fuelled election economic recovery as per the in depth analysis of 31st December 2009.

However I expect this preliminary data to be revised marginally higher over the coming months.

The ONS break down for UK Q4 GDP Data

Services output rose 0.1 per cent, compared with a fall of 0.2 per cent in the previous quarter. Distribution, hotels and restaurants contributed most to the increase. Distribution, hotels and restaurants rose 0.4 per cent, compared with an increase of 0.7 per cent in the previous quarter. Motor trades and retail contributed most to the increase. Transport, storage and communication showed zero growth, compared with an increase of 0.7 per cent in the third quarter. Business services and finance showed zero growth in the fourth quarter, compared with a decrease of 0.8 per cent in the previous quarter. Government and other services rose 0.2 per cent, compared with a decline of 0.2 per cent in the previous quarter. Health made the largest contribution to the increase.

Total production output rose in the fourth quarter, increasing 0.1 per cent, compared with a fall of 0.9 per cent in the previous quarter. Manufacturing made the largest contribution to the increase rising 0.4 per cent, compared with a fall of 0.2 per cent in the previous quarter. Mining and quarrying output rose 1.0 per cent, compared with a decrease of 5.7 per cent in the previous quarter. Electricity, gas and water supply fell 3.3 per cent, compared with an increase of 0.2 in the previous quarter.

Construction output showed zero growth in the fourth quarter, compared with an increase of 1.9 per cent in the previous quarter.

Agriculture, forestry and fishing output decreased 0.6 per cent, compared with a fall of 2.8 per cent in the previous quarter.

UK Interest Rates Forecast 2010

The weak GDP data confirms my view that UK interest rate hikes will be delayed until the second half of 2010 as per my in-depth analysis and forecast of 13th Jan 2009 that forecast UK interest rates would rise to 3% by mid 2011, and end 2010 at the target rate of 2%.

UK Inflation Forecast 2010

My inflation forecast for 2010 as of 27th December 2009 as part of the inflation mega-trend ebook due to be published this week and made available for FREE (subscribe to free email newsletter) forecast UK inflation to rise to above 3% early 2010, spiking as high as 3.6% and stay above 3% for most of the year only dipping to 2.7% by the end of the year as illustrated by the below graph.

Source : http://www.marketoracle.co.uk/Article16777.html

By Nadeem Walayat http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market . Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Jas Singh
29 Jan 10, 10:28
Nadeem Walayat

How about an article on Nadeem Walayat himself? A self written bio if you like.

I do not think I am the only one who is intrigued to know more behind the man who brings us the most reliable forecasts of the UK economy on the net!

All the best

JS


John Rooney
29 Jan 10, 14:43
UK GDP

Do you think UK Q1 GDP could be negative (if not negative then a very weak positive figure) due to:

1. Severe weather conditions in January adversely affecting various industry sectors

2. Big ticket items being bought in Q4 2009 ahead of January 2010 VAT rise---resulting fall off in QI?

3. Ending of car scrappage scheme in February. If I recall rightly, the car scrappage scheme accounted for over 20% of UK new car sales last year, brought sales forward and presumably will be reflected in substantially lower year on year comparisons for new car sales in 2010.

John Rooney


Nadeem_Walayat
29 Jan 10, 14:48
NW Bio

I plan to do a free ebook on the real secrets of successful trading which in large part will be a bio as it takes the readers down a 25 year or so trading path of what ARE the real secrets.


Nadeem_Walayat
29 Jan 10, 14:50
UK GDP

Whilst all of the above are negatives, however the forecast based on prior analysis (December) is for a strong debt fuelled economic recovery in Q1, that will surprise all.

Q1 data will be released in late April, just before the May election, also 2009 Q4 will be revised higher at the same time.


Angela V
29 Jan 10, 15:00
Nadeem

Bring on the bio, Nadeem!

Your articles are always eagerly awaited and never disappoint: remarkably accurate forecasts, and exhilarating to read.

AV


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