Monday, January 31, 2011

The Disappointing GDP Figures.

Much the most important item of news last week was the announcement that the UK's GDP fell by 0.5% over the last three months of 2010. This was both surprising and disappointing. The Chancellor believes GDP fell into negative territory as a consequence of the wintry weather throughout December - but George Osborne acknowledges that GDP would have been 'flattish' even if the sun had shone. What has instigated this blog post is some of the utterly ridiculous commentary that has followed this disappointing announcement.

Firstly, some people who should know better are claiming that Coalition Government 'cuts' are the cause. Well the problem with this is that there have not been any cuts. For sure, there's been plenty of discussion about 'cuts'. But during the last three months of 2010, public spending rose substantially on the previous year. Public spending increases are like a very big 'tanker' - very difficult to stop and turn around when steaming ahead at full throttle. If public spending really does equal economic growth, the UK economy would have been flying. The painful (to come) reality is that it absolutely doesn't - not while there's a huge structural deficit issue anyway.

And then we've had the barely credible comments from the Shadow Chancellor today. He's dismissed the public policy statements of the Governor of the Bank of England as being not what he actually believes. This is tantamount to accusing Mervyn King not telling the British public the truth. I wonder if anyone believed his nonsensical comment. Its also now become clear that the Labour opposition intend to claim that the difficulties facing our public finances are nothing whatsoever to do with the previous Government. Can't we have the more sensible and credible Alistair Darling back!

Its only one set of figures so we cannot take it as a trend. But since private sector growth is fundamental to the Government's economic strategy, its inevitable that there will be calls on the Chancellor to look seriously at reducing the costs and regulations which hold business back when he finalises his budget next month. And there will also be more calls on the banks to lend the money needed for the private sector to be able to compete for infrastructure projects. Its going to be an interesting budget.


C Wood said...

But it's obvious that the talk of the cuts is having a chilling effect on family and individual outlays, company orders based on likely future demand, etc.

I don't buy the 'snow effect' either - the East coast and Midwest of the USA has got hammered this winter, and yet last quarter's GDP looks very healthy.

However, job creation and unemployment stayed much the same.

The USA job situation is not going to improve much at all and to my mind what happens in 2012 will set the pattern for the western hemisphere and by inversely the far east/China etc.

If America doesn't regain its vitality by 2012 ...

There's tripe and there's ... said...

...and 'oh yeah', the static coming out of Washington, DC is "Innovation, we don't like it, oh no, we love it"; and "We live by it, INNOVATION".

So what's happening at Swansea University which is waving the innovation flag in support of its' new campus east of the city?

Well, Swansea University didn't make it into the top 100 world ranked universities, nor into the top 200... no sirree, and not into the top 300, and some argue that Swansea University is a world ranked university – well, it is, it’s ranked somewhere, just not in the top 300; in fact Wales still doesn’t have a single university in the top 100 tier whereas Scotland has three.

Innovation - Swansea Uni yaps on about it, yet its patent filing rate is ... where? Well, in the USA it’s down in the mud.

Oh, what about the millions spent on its' supercomputer - how many issued patents did that generate? Well, in the USA ... well ... not many...

But hey Swansea University could generate 10,000 jobs in partnership with Rolls Royce... and there will be 2,000 lectureships on the new campus...

Hang on, how many people does Rolls Royce employ at its Derby works? Ya know, the place where Rolls Royce actually makes the airliner engines? Oh, about the same number ... so Swansea University will be going ‘nose to nose’ with Rolls Royce's famous Derby works?

How many of those 2,000 lectureships will merely be transfers from its main campus?

Das anybody know?

What the fox dragged in... said...

Perhaps Swansea University and/or WAG are counting worker-ants as employees.

Making up BIG numbers said...

or double counting ... students as lecturers and lecturers as Rolls Royce partners and cleaning staff as research scientists and road sweepers as high temperature materials specialists.

Anonymous said...

we haven't the money to spend anymore. the cost of living is rising beyond our means. Those that do have money are fearing for their job security. I think it's only fair that you should know that.

Look around you. look at how much everything has risen in cost.

Look at all the job loses in this area in the past 12 months. The huge knock on effect this has is scary.

Blank this message if you wish but these are the facts as we live today.

Glyn Davies said...

Anon - Although I've decided to delete anonymous comment, because so much of it has become childishly offensive, I will continue to publish if a worthwhile point is being made - though I find it odd that you feel you need to hide your identity. There have been job losses all over the country, and we know there will be more, particularly in the public sector. However, my experience of talking with employers in Montgomeryshire is that the position locally is better than in many other places. Biggest job loss has been at Shop Direct, which was a consequence of changed shopping habits, and Siemens, which (in my opinion) followed a loss of confidence in the ability of National Grid to provide an electricity infrastucture to serve mid wales. Some businesses are losing a few, and some are increasing a bit. Your other points relate to the apalling public finances that the Coalition Government is trying to bring under control. The previous Government left an annual deficit of over £150,000,000,000 - rising by about £500,000,000 every week. They spent like there was no tomorrow - on the next generation's credit card in a deeply immoral way. The Liberal Democrats and the Conservatives have accepted that we have no choice but to reduce public spending to restore the UK's credibility. There remain some very foolish and irresponsible people who would prefer to carry on spending. Alcoholics and bankrupts behave like that - not national governments.