Most Popular
1. Dow Max Drawdown Bear Stock Market 2022 - Accumulating Deviations from the Highs - 21st Feb 22
2.Putin Starts WW3 in Ukraine, Will Use Tactical Nuclear Weapons, China Prepares Taiwan Blitzkrieg - 28th Feb 22
3.World War 3 Phase 1 - Putin WINS Ukraine War! - 25th Feb 22
4.INVESTORS SEDUCED by CNBC and the STOCK CHARTS COMPLETELY MISS the BIG PICTURE! - 10th Feb 22
5.Will There Be A 2024 US Presidential Election? - 3rd Mar 22
6.Gold and SIlver, Precious Metals Sector Is at a Terrific Buy Spot - 6th Feb 22
7.Why Putin Wants the WHOLE of Ukraine - World War 3 Untended Consequences - 6th Feb 22
8.Dow Stock Market Expected Max Drawdown 2022 - 19th Feb 22
9.Stock Market Calm In the Eye of the Inflation Storm - 4th Mar 22
10.M = F - Everything is Waving! Stock Market Forward Guidance - 7th Mar 22
Last 7 days
Why Ray Dalio is WRONG About China - Principles for Dealing with the Changing World Order - 24th May 22
Globalists Convene to Plan Central Bank Digital Currencies - 24th May 22
After Recent Highs, What’s Next for the Gold Junior Miners? - 24th May 22
Why APPLE Could CRASH the Stock Market! - 21st May 22
Why Is Crude Oil Ignoring US Inventories? - 21st May 22
Here is Why I’m Still Bullish on Gold Mining Stocks - 21st May 22
THE INFLATION MEGA-TREND QE4EVER! - 20th May 22
US Real Estate Investors – Is There An End In Sight? - 20th May 22
How Technology Affected the Gaming Industry - 20th May 22
How To Set And Achieve Reasonable Goals For Your Company - 20th May 22
How Low Could the Amazon (AMZN) Stock Price Fall? - 19th May 22
Bitten by FANG? Clocked by Cryptos? -- 'Air Pockets' Everywhere - 19th May 22
Northern General Hospital Orthopedics Fractures and and Ankle Clinic Consultations Real Patient Experience - 19th May 22
Cathie Wood Goes All in on Teladoc, ARKK INSANE Noob Investing Strategy! - 17th May 22
This is Anything but Positive for US Housing Market - 17th May 22
What Should We Do If There Is No Fed Monetary Policy Pivot? - 17th May 22
All Possible Ways to Earn Free Litecoin - 17th May 22
How low Could the Amazon Stock Price Fall? - 16th May 22
Cathy Wood ARKK INSANITY There is NO Coming Back! - 16th May 22
NASDAQ 100 Stock Market LOWER LOWS & LOWER HIGH - 16th May 22
Sanctions, trade wars worsen US inflation - 16th May 22
AI Tech Stocks Earnings BloodBath Buying Opportunity - 14th May 22
Futures Contract – Trading Crude Oil With USO - 14th May 22
How to Get Kaspersky Internet Security for 80% Discount! Do not Pay Renewal Price! - 14th May 22
Sagittarius A* Super Massive Black Hole Monster at Centre of Our Galaxy REVEALED! - 14th May 22
UK Public Debt Smoking Inflation Gun - 13th May 22
What Happens When the Stock Market Dip Keeps Dipping? - 13th May 22
Biden Seeks Inflation Scapegoats; Gold Advocate Wins GOP Primary - 13th May 22
Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - 12th May 22
The War on Gold Ensures the Dollar’s Downfall - 12th May 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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

© 2005-2019 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