Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
SPX/Gold, Long-term Yields & Yield Curve 3 Amigos Update - 22nd Jun 18
Gold - How Long Can This Last? - 22nd Jun 18
Dow Has Fallen 8 days in a Row. Medium-long Term Bullish for Stocks - 22nd Jun 18
Trouble Spotting Market Trends? This Can Help - 22nd Jun 18
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

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

UK Stealth Economic Boom, GDP 1.1% Growth Catches Press and Academic Economists By Surprise

Economics / UK Economy Jul 23, 2010 - 08:51 AM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleThe UK registered strong GDP growth during the second quarter of 2010 of 1.1%, annualised to 4.4%, which caught the mainstream press, academic economists and even the City by surprise who had typically penciled in growth expectations of between 0.3% and 0.5% from just the day before let alone longer term actionable forecasts, much of the recent mainstream press commentary has been focused on the risks of a double dip recession as illustrated below:


Bloomberg - Blanchflower Says Budget `Certain' to Lead to Double Dip

Former Bank of England policy maker David Blanchflower said the spending cuts the government plans in its emergency budget tomorrow “look certain” to push the U.K. back into a recession.

“You can’t just decimate the public sector and assume the private sector will step into the hole,” Blanchflower said in an interview on Bloomberg Television’s “Countdown” in London today. “The danger now is we’re certainly going into a double- dip recession. I think that’s absolutely certain given what’s coming.”

Financial Times, Martin Wolf is worried that the concerted austerity of Germany, Britain and other industrialised countries may "destroy the recovery".

Guardian - Britain's leading companies increasingly fear the UK could suffer a double dip recession because of government public spending cuts and a renewed economic slowdown across the globe, according to a report released today.

Telegraph - A survey of chief financial officers (CFOs) by Deloitte found that a balance of just 24pc were feeling more optimistic in the second quarter, compared with 40pc in the first quarter.

It was the lowest level in 12 months, as the average CFO attached a 38pc probability to the chance of a double-dip, up from 33pc previously.

The so called experts who never saw the strong economic recovery coming reacted by dismissing the figures as unsustainable in the face of government austerity measures to combat the UK's budget deficit.

UK Economic Growth Forecast 2010 to 2011

The UK economic GDP growth for 2010 Q2 came in at 1.1% compared against my forecast of December 2009 Q2 growth of 1.3% (31 Dec 2009 - UK Economy GDP Growth Forecast 2010 and 2011, The Stealth Election Boom ), which is against expectations of yesterday from the academic economists that populate the mainstream press of between 0.3% and 0.5%.

The growth trend is inline with my forecast expectations that projected a strong economic recovery starting in Q4 2009 and for the whole of 2010 continuing into 2011 as illustrated by the graph below.

Growth for the first half of 2010 now stands at 1.5%, which compares favourably against my expectations for 2010 growth of 2.8% and blasts a hole in the forecasts of academic economics institutions as the below table from the Inflation Mega-Trend Ebook illustrates (FREE DOWNLOAD) -

UK Economic Growth 2010

Forecaster Forecast
European Commission +0.9%
International Monetary Fund +0.9%
David Kern, British Chambers of Commerce +1.1%
Organisation for Economic Co-operation and Development (OECD) +1.2%
Alistair Darling, Treasury +1% to +1.5%
Bank of England +2.1%

 

However the ConLib government has effectively pressed the reset button on the UK by announcing the most radical budget of the past 30 years that seeks to withdraw £113 billion annually out of the economy by 2015-16 which will undoubtedly impact on economic growth for many years and therefore demands in depth analysis to evaluate the prospects for growth once the austerity measures start to be implemented from October 2010. To receive this in depth analysis and forecast in your email in box ensure you are subscribed to my always free newsletter.

Bank of England Ignoring UK Inflation

UK Inflation of CPI at 3.2% for June 2010 is exactly in line with my trend forecast for 2010 as of December 2009 that projected June inflation data of 3.2%. My analysis since November has been warning of a spike in UK inflation as part of an anticipated inflation mega-trend (18 Nov 2009 - Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend ) that culminated in the forecast of 27th December 2009 (UK CPI Inflation Forecast 2010, Imminent and Sustained Spike Above 3%) and the Inflation Mega-trend Ebook of January 2010 (FREE DOWNLOAD) as illustrated by the below graph.

UK Inflation May 2010

The governments response to high inflation has been to CHANGE the recognised measure of inflation from RPI to CPI indexing so as to use a sleight of hand to effectively tax the country by an extra 1 to 2% per annum so as to depress benefit payments, spending and wage increases which are predominantly increased in line with RPI inflation i.e. 5% instead of 3.2%, this is also in advance of the VAT hike which is expected to send RPI above 6%.

Another sign of this stealth theft was the NS&I pulling the plug on Index Linked Certificates which were one of the few defences against the governments inflation stealth tax. The certificates paid RPI +1% resulting in an current tax free return of 6% per annum which is typically double the rate offered by the the bailed out banks. It is highly likely that when the certificates return they will linked to CPI which tends to be between 1% and 2% below the RPI measure and therefore makes a huge difference over the long-run.

UK Interest Rates

The theft from savers continues with UK base interest rates held at 0.5% despite real UK inflation of 5%, resulting in pittance savings rates of less than 2% for most savers and even the best accounts are barely able to reach 2.5%.

Existing Forecast : UK Interest Rates Forecast 2010-11: UK interest Rates to Start Rising From Mid 2010 and Continue into end of 2010 to Target 1.75% / 2%, Continue Higher into Mid 2011 to Target 3%. (UK Interest Rate Forecast 2010 and 2011 )

My UK interest rate forecast will need to be revised following the new governments emergency reset budget which will follow on from the in depth analysis of the UK economy over the next few days (subscribe to my always free newsletter).

Comments and Source: http://www.marketoracle.co.uk/Article21339.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 and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. 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

Hristo Botev
24 Jul 10, 13:11
Sterling

Dear Nadeem, thank You for Your comments and forecasts!They are extremely useful for me and the regular people, workers and savers!

Could You,please, include in your coming in depth analysis forecast about the exchange rates of sterling against euro and dollar.Do You expect EUR/GBP to go below 0.78 in the late autumn?

One more time Thank You very much!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules