Quest Means Business   « Back to Blog Main
January 26, 2010
Posted: 1217 GMT

The UK Q4 GDP figures announced this morning were a shocker. However, the British economy scraped its way from recession in Q4 by its dirty finger nails. The median forecast of a 0.4 percent gain in GDP by the majority of renowned economists were rubbished and the official figure of 0.1 percent increase is a massive set back.

I wondered why Lord Mandelson was so guarded about the recovery, reiterating that it was so brittle. The services sector underperformed. It expanded by just 0.1 percent and not the 0.5 or 0.6 percent rise suggested by the business surveys.

With household incomes under pressure, credit in short supply and a major fiscal squeeze looming, the path to a full recovery is going to be a long and tortuous.  I am in the minority that believes that GDP will grow by just 1 percent in 2010. Talk of an exit of quantitative easing, despite opinion to the contrary, is not only precipitous, but also folly in the current circumstances.

The auto sector did well thanks to a stimulus program, which may be fully utilised before too long.

Going forward, this recovery may well be achieved with high unemployment. Last month’s retail sales rise of 0.3 percent was disappointing. Going forward we’re all skint with taxation likely to increase and with less disposable income finding its way to the shopping malls.  Retail is so important!

Perhaps Messrs Brown, Darling, Myners et all will desist from larruping the banks too much, whilst the economy is in such a parlous state. That does not presuppose that radical regulation is not a prerequisite ,as well as some taxation over a protracted period of time  to ensure the taxpayer is repaid in full. The bonus culture is being altered. Few disagree with that philosophy.

Posted by: ,
Filed under: Banking •Business •Quest Means Business


Share this on:
Powered by WordPress.com VIP