UK News

from MacroScope:

UK GDP: Should have gone to Specsavers?

Markets are getting used to volatile swings in economic data since the financial crisis set in three years ago. But UK GDP figures for Q2 were so eye-poppingly strong they caused confusion on trading floors.   

"Should have gone to Specsavers??" wrote Philip Shaw, chief economist at Investec, referring to British television commercials lampooning myopic citizens who desperately need a new pair of corrective lenses.

"Perhaps critics will suggest that the ONS has got it wrong again, but traders' initial suggestions, calling into question the accuracy of the newswire reports -- and this author's eyesight -- proved to be misplaced," wrote Shaw.

The 1.1 percent quarterly growth the Office for National Statistics reported for Q2 was nearly double the 0.6 percent Reuters consensus forecast and blew out the highest forecast polled, 0.8 percent, by a significant margin. The fact it came a half hour after news the German Ifo index saw its biggest one month surge since reunification in 1990 made it all the more shocking.

from MacroScope:

Slowing growth, MPC splits? That’s so 2008

Sixties nostalgia was all the rage in the late 90s, and towards the end of the last decade we looked back only 20 years or so for a massive 80s revival in electronic pop and fashion.

With the 2010s in full flow, the current vogue of choice derives from just two years ago – at least among those noted trendsetters, economists.

Back in mid-2008, the signs for the UK economy were confusing and ominous. Inflation was too high, forward-looking indicators pointed to a slowdown of some sort in the near future, and the July minutes of the Bank of England’s monetary policy committee showed they debated both easing and tightening interest rate policy.

Step forward into 2010. In Wednesday’s July MPC minutes they discussed both easing and tightening while digesting a puzzling picture of – yes – high inflation and forward-looking surveys pointing to a slowdown of some sort in the near future.

“Do we have a much clearer idea over where monetary policy is going in the rest of the year?” asked Investec economist Philip Shaw after seeing the latest minutes.

“No. It’s shrouded in confusion,” was the stark conclusion.

Reuters’ latest long-term UK economy poll underscored this familiar sense of doubt. It showed a range of some 2.7 percentage points separating the lowest and highest forecasts for UK economic growth next year, compared to a 2.4 percentage points gap in the corresponding forecasts from the July 2008 poll.

from MacroScope:

It’s all Germany’s fault

It is fairly commonplace at the moment for U.S. and UK financial analysts -- what continental Europeans call the Anglo-Saxons -- to predict the collapse of the euro zone,  a project they were mostly sceptical about in the first place.  MacroScope touched on this on two occasions in March.

The latest foray into this area comes from Alan Brown,  global chief  investment officer at the large UK fund firm  Schroders. But he does it with twist,  blaming what he sees as the eventual  collapse of the euro zone not on the structure itself nor  on the profligacy of peripheral economies, but on Germany's response to the crisis.

Brown reckons countries like Greece cannot do what is needed.

If Greece does all that it is asked to do, it’s debt/GDP ratio will rise to around 150 percent as debt continues to accumulate and the denominator declines as a result of a renewed recession and deflation. With debt at 150 percent and real interest rates anywhere near today’s level, Greece would have to run a primary surplus of around 8 percent  of GDP just to stabilise its debt ratio.

In the best of worlds, Brown says, German and other northern euro zone countries would solve the problem by stimulating their own economies to offset the deflationary impact of measures to improve public finances in the profligacies.

Increased demand from Germany (and other Northern European countries) would boost demand for goods and services from the South helping to maintain growth in the euro zone region as a whole and to reduce the current chronic current account imbalances.

Brown says the trouble is  that is not likely to happen. Germany has actually done the opposite, launching its own austerity programme.

from The Great Debate UK:

Heather Rogers on fixing “Green Gone Wrong”

How can human production be transformed and harnessed to save the planet? Can the market economy really help solve the environmental crisis?

Author Heather Rogers argues in a new book that current efforts to green the planet need to be reconsidered.

The growth-based economy can't help but add to the problems the planet faces, Rogers writes in "Green Gone Wrong" published by Verso.

"I think we can have an economy that supports environmental health, but we have to differentiate between growth and development."

"It's not about feeling guilty, it's not about sacrifice and suffering, it's about understanding how we can have a healthy economy, good standards of living and wellbeing -- within that is protecting the environment."

Rogers, who will speak the Institute of Contemporary Arts on Wednesday, set out her argument for Reuters after a talk in London at the New Economics Foundation.