/ Economy grows by 09% shrink by 0.3% - meaningless?

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FrankBooth - on 25 Jan 2013
So the results this morning from the ONS claim the economy shrank by 0.3% and the doom mongers are out in force. I run a small business and concur that times are hard, but surely a 0.3% shift either way is really quite meaningless, the margin or error must be at least 1% surely?
elsewhere on 25 Jan 2013
In reply to FrankBooth:
All GDP figures have some uncertainty and they're often revised a bit later but why is -0.3% more meaningless than +2.5% or any other GDP growth figure with a similar uncertainty?

Look at the graph and judge for yourself where it fits in.
https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d...
FrankBooth - on 25 Jan 2013
In reply to elsewhere:
That's what I'm trying to say, really - there's very little point making a biggish deal of such a small figure
Skyfall - on 25 Jan 2013
In reply to elsewhere:

Not seen that, thanks.

There is a clear trend for decline in growth and my personal feeling (running a financial services business catering for entrepreneurs) is that we are in a recessionary environment.
elsewhere on 25 Jan 2013
In reply to FrankBooth:
> That's what I'm trying to say, really - there's very little point making a biggish deal of such a small figure

I disagree, small numbers like -0.3% is just as valid a number as any other number. If you look at the graph the big deal is that it's at the bad end of economic data.
John Rushby - on 25 Jan 2013
In reply to FrankBooth:

Looking at what's happening in real estate / business advisory which is what I work in, it looks like we may, just may be turning a corner.

I think the stabilisation of the Euro and the increased confidence in the US' ability to manage their economy is bringing a more confndent view.

We are seeing an increased liquidity in the market, increased lending into real estate and yields are falling - a sign that risk is decreasing and also confidence is increasing in the bond market, which is the primary bench for real estate investment analysis.

If you look at the wider picture - the FTSE is at pre-recession levels which an investment analyst colleague tells me is the sign of an increased appetite for risk.
FrankBooth - on 25 Jan 2013
In reply to John Rushby:
Bit of a crap analogy perhaps, but it's easier to get fat than loose weight. By 2007 western economies had become so bloated we knew the pain of a crash diet was inevitable.

I think the points you've made about the FTSE levels, and a bit of confidence in the real estate sector are much better indicators of the real state of the economy. Earlier this week I heard a report that house prices (outside London) should reach pre-recession levels by 2014, and as long as this happens (and the banks start lending again), I think we can avoid a Japanese-style 20 years in the doldrums.
neilh - on 25 Jan 2013
In reply to FrankBooth:

The % is meaningless at these small margins. Now if it was a decent number - say 4 to5% then it would be different.

Anyway they always reveise the figures latar, as its only a snapshot of I thing 40% of the economy from what I remember.

I run a small businees - engineering export driven - I have never been busier
elsewhere on 25 Jan 2013
In reply to neilh:
Not meaningless at all, -0.3% tells you "not very good" compared to what you describe as a decent number or a more normal 2-3% in the UK.
neilh - on 25 Jan 2013
In reply to elsewhere:
Considering it will be correctd later it's meaningless. In view of the margins for error it's totally irrelevant. It's stupid number and it does not mean anything other than nothings changed.
Eric9Points - on 25 Jan 2013
In reply to neilh:
> (In reply to elsewhere)
> It's stupid number and it does not mean anything other than nothings changed.

..which in itself means something.

elsewhere on 25 Jan 2013
In reply to neilh:
It's no less meaningful than any other GDP figure, they're always subject to uncertainty and revision.
-0.3% means shrinkage just as much as +2.5% means growth or -2.5% means a slump.
Bjartur i Sumarhus on 25 Jan 2013
In reply to John Rushby: Increased confidence in the bond market? Who buys bonds these days apart from their own central banks?

I think we are about to see a bond crisis myself. Yields to rise, and more QE to contain. It looks desperate to me. The flight from bonds is why we are seeing an uptick in equities.I think equities will continue to climb through to mid year. Then a good chance of a crash. Speculation of course

I think we are in a depression, and I think inflation is already out of control. Just none of the "official" figures or politicians will say that.

Steve John B - on 25 Jan 2013
In reply to elsewhere:
>
> Look at the graph and judge for yourself where it fits in.
> https://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d...

If you change the date range to 1990-present it shows an upward trend while Major was PM, then a downward trend until 2009. Interesting stuff.
Steve John B - on 25 Jan 2013
owlart - on 25 Jan 2013
In reply to neilh:
> (In reply to elsewhere)
> Considering it will be correctd later it's meaningless. In view of the margins for error it's totally irrelevant.

Yes, I think the point trying to be made here is that if growth is -0.3% +/- 1% then we could just as easily be experiencing small growth as small decline, whereas with larger numbers, 2.5% +/- 1% is still growth whichever way you look at it.
Mike Stretford - on 25 Jan 2013
In reply to owlart: Yep. We are flat lining (to be expected really.... but I do think the government could have channelled what they have spent more effectively).
elsewhere on 25 Jan 2013
In reply to owlart:
-0.3% +/- 1% has just as much meaning as 2.5% +/- 1%, there seems to be an irrational prejudice against the number zero and numbers close to it.

In this context -0.3% means we are about 2.5 or 3% down on the +2 or +2.5% where we want to be. The uncertainties and subsequent corrections won't be 2 or 3% (maybe 0.5%?).
Bjartur i Sumarhus on 25 Jan 2013
In reply to Papillon: We are flatlining alright, probaly worse than that. The government has tried almost everything in the locker. Prolonged near zero interest rates and stimulus expenditures, to the creation of money in biblical proportions. This has always worked in the past, but not this time.

No, this time it's very different. And unfortunatley it's looking very bleak indeed. Hyper inflation is looking increasingly likely in an attempt to escape from unpayable debt.

Time to get used to life after growth.
neilh - on 25 Jan 2013
In reply to Eric9Points:
agreed, so we are just ticking over, just.
neilh - on 25 Jan 2013
In reply to Game of Conkers:

Devaluing the by 20%......maybbe we are on the way to that any way.
Shani - on 25 Jan 2013
In reply to Game of Conkers:
> (In reply to John Rushby) Increased confidence in the bond market? Who buys bonds these days apart from their own central banks?

Interestingly Iceland are doing alright on the bond market having ignored the advice of mainstream economists. Having walked away from their debt they are now seen as a safe(r) investment bet as they are more likely to pay back loans without the burden of debt endured by, for example, Ireland.

Contrast this 'Iceland Goes Bankrupt' story from 2008 (www.businessweek.com/the_thread/economicsunbound/archives/2008/10/iceland_goes_ba.html) with this one where Iceland's bond issues were oversubsribed (www.bloomberg.com/news/2012-03-27/iceland-targets-wealth-funds-as-new-law-hits-bondholders.html).

Forget the advice of most economists and simply follow the money.

Bjartur i Sumarhus on 25 Jan 2013
In reply to Shani: Whilst I agree that Iceland have turned things around, the hit of nearly 15% devaluation and 20% inflation they took would not be something that the UK could endure particularly well.

Having said that. This will happen to us and is happening right now. Just at a much slower pace, probably taking the next 15 years to play out.
Shani - on 25 Jan 2013
In reply to Game of Conkers:
> (In reply to Shani) Whilst I agree that Iceland have turned things around, the hit of nearly 15% devaluation and 20% inflation they took would not be something that the UK could endure particularly well.
>
> Having said that. This will happen to us and is happening right now. Just at a much slower pace, probably taking the next 15 years to play out.

Maybe but I am not sure if anyone really knows. There is re-trenching of the economy going on in the UK which will obviously precipitate some kind of pain, but there are firm signs of growth in manufacturing (cars production in particular), aerospace industries, creative media and so forth.

This is all against a back drop of global re-trenching which confound robust, long-term forecast.

Ed Balls really is an arrogant fool. On statistically insignificant data he makes such firm proclamations. World economics are way to subtle in their integration and dynamic in their ebb and flow for him to state a 'cure' for our ills. Whilst Osborne does seem to be missing some tricks, focus on the debt is paramount, but not the be-all and end-all.
neilh - on 25 Jan 2013
In reply to Shani:
Iceland is a tiny economy and hardly has a bearing on the grand scheme of things -its hardly got a major population--- no disrespect to anybody from Iceland.

Follow the money - invest in equities?
ads.ukclimbing.com
Shani - on 25 Jan 2013
In reply to neilh:
> (In reply to Shani)
> Iceland is a tiny economy and hardly has a bearing on the grand scheme of things -its hardly got a major population--- no disrespect to anybody from Iceland.
>
> Follow the money - invest in equities?

The small population is largely irelevant - it is the size of the debt that is important.

We should have jailed the bankers and bailed the tax payers as this would have eased liquidity and kept the real economy moving rather than locking it up in the banking system. But no, as it stands we are still picking up the bill for the bankers whilst the finance industry migrates surreptitiously eastward (it will go where it can make a profit regardless of ethical and moral considerations).

By 'Follow the money) I mean to say that markets don't care about your past, they care about making money NOW and 'going forward'.

Economic policies need to be analyzed in terms of the incentives they create, rather than the hopes that inspired them.

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