So, the UK is back in recession. Let’s all panic and head for the hills…
Or is it? There are four possible responses to today’s news that an initial estimate suggests the UK economy contracted by 0.2 per cent in the first three months of 2012.
One is political: government policy has failed and the coalition “cut too far and too fast”. The usual hot air, in other words.
The second is geographical: while London, the south and east have steamed ahead, the rest of the country never really climbed out of recession anyway (the further north you go, the more the economy becomes dependent on public money).
The third is scientific: quite a few economists and statisticians simply don’t believe the ONS figures because this general measure has been consistently at variance with what surveys about specific business sectors say. The ONS’s methodology may be a bit flawed.
The fourth is from business: how come the Office for National Statistics says the economy contracted 0.2 per cent when the Derbyshire & Nottinghamshire Chamber’s own survey of the same period said business had regained nearly everything it lost last year?
It really does pay to put the politics to one side, because in a climate like this it generates far more heat than light.
Not for the first time I should also point out that today’s figure is merely an initial estimate based on an analysis of only 40 per cent of the data which ultimately goes into a GDP figure. It will be revised at least three times, and for technical reasons the first quarter of a year is often harder to judge than others.
There is particular concern about the ONS’s assessment of the construction industry. It says weakness here is one of the key reasons for the fall back into recession. Yet the industry itself suggests the picture is not that bad.
And on the very same day that the ONS fingered weak manufacturing as another contributory factor for technical recession, the CBI said there were signs of a bounce back in manufacturing activity during the same period.
Indeed, the CBI has gone on record this morning with its usual diplomatic language, saying it is "surprised" by the ONS figures.
That's putting it mildly. There is a clear conflict between what the ONS is suggesting and what some industries are saying themselves.
Unarguable facts are that our economic recovery is very sluggish and geographically patchy: some sectors are doing better than others, some parts of the country are better than others, some of what we have lost won’t come back because the economy has changed, Eurozone economies still haven’t properly sorted their debt issues.
One more unarguable fact: businesses themselves are sick to the back teeth with supposed media ‘recession porn’ – an obsession with negative economic news.
So the fight over recession is largely political. As tough as it is, business is getting on with the job.
Showing posts with label recession. Show all posts
Showing posts with label recession. Show all posts
Wednesday, 25 April 2012
Wednesday, 1 February 2012
Welcome to doom-watch
I was out chatting to a mate who works in property just after the latest GDP figures dropped into my inbox last week.
In itself, the 0.2 per cent contraction was unremarkable. I’d seen enough data and anecdotal evidence to know that growth had been looking like a pancake since the summer.
What was notable was the reaction to some of the coverage of it. News websites were dominated by portentous stories which spoke of an economy ‘lurching towards recession’. Politicians wagged fingers and spoke of double dip as if it were Lord Voldemort.
When I mentioned it to my mate his reaction was one of near despair: “I am absolutely sick to the ******* back teeth with this. It’s been tough for years and you just get on with it. Some people are still doing OK. But what does the bloody television do? They just revel in it.”
Now, his company happens to be doing OK, though business is a hard slog and deals take time to happen because people are cautious. What concerns him is that he believes their caution stems in part from a relentless focus on negative sentiment in the media.
As a journalist of *cough* years’ experience, I always bridle at any suggestion we should ignore ‘bad’ news. News is the world we live in, which is not necessarily the way we’d like it to be. So it’s up to you to decide whether it’s bad or not. And I have a real beef with politicians who are all for press freedom but wish we were a bit more positive (about them).
But there is a serious point underneath what my mate was saying.
Confidence, sentiment or whatever you want to call it, is NOT an intangible concept which is separate from what happens in the real economy. The Bank of England recognises it as a key factor in investment, spending and purchasing decisions and assesses it when it does its own economic forecasts.
So it’s right to ask questions about what influences economic confidence.
The media clearly is an influence because it tells people what’s happening in the wider world – both the hard facts and people’s interpretation of what those facts mean.
There WAS a 0.2% fall in economic output between the start of October and the end of December last year. There IS a consensus that we may see the same again when the figures come out from January to March. If that happens, we WILL have satisfied the technical requirements to classify the period as having been in recession.
But what does a recession really amount to? And has the media got its head round the impact it actually has on our 21st century economy?
My mate’s belief – and he is far from alone – is that the media’s assessment of what recession actually amounts to is a doom-laden cliché rooted in memories of either 1930s dole queues or 1980s factory closures.
Neither are appropriate to where we are now.
In the 1930s, we had a depression, an altogether deeper and more prolonged period of economic contraction made more serious by the lack of a welfare safety net, out-dated economic levers which didn’t allow a dynamic response, and a political class stuck in the past.
In the 1980s, we finally began to confront the reality of an uncompetitive manufacturing sector whose costs, efficiency and working practices had long been outclassed by Germany and Japan, both of whom reinvented themselves in the wake of wartime defeat.
But that was the past.
In 2012, we are the sixth biggest economy in the world, we have a comprehensive welfare safety net, and we have a much more flexible economy which doesn’t get lost in hang-ups about major change and reacts pretty quickly.
Certainly, the view of many people in business that I talk to is that, yes it’s difficult, but not disastrous. Growth is still possible, and if the economy contracted by 0.2 per cent they’re focusing on the 99.8 per cent that’s still happening.
So while the political approaches of the main parties seem pretty traditional, the economy they pronounce on is not the same as it was even 30 years ago.
Is this where the problem lies – that the media is simply echoing the politics of the economy, which are all about heavily-prejudiced interpretations, rather than the reality for business?
The idea that business just gives up and goes home because the GDP figure ticked down a bit is utter tosh. People who run businesses just don’t inhabit that kind of negative universe.
Our attitudes to recession are similar to those we used to have about unemployment. While no one is happy that more than 2 million are out of work, the fuss being made about it is nothing compared to the uproar when it broke through the 1 million barrier in the early 1970s.
Then, with a generation whose memories of the 1930s were still vivid, joblessness was seen as a social cancer to be avoided at all costs. But the government’s attempts to solve it by throwing money at the economy simply caused rampant inflation.
The truth was that unemployment had been rising naturally since the 1960s as our economy began to switch away from out-dated large-scale manufacturing. Today, it’s broadly accepted that if we want a flexible economy with low inflation, some level of unemployment is the price we pay.
So if businesses don’t go into panicked hibernation when recession sets in, and unemployment is a natural consequence of a modern economy, why do the headlines sometimes suggest we are staring disaster in the face?
I’d point the finger at three causes.
One is that the financial crash was a near-disaster, and has caused damage which has gone deeper and lingered longer than a simple, cyclical recession.
Second, London media is dominated by a politics which can’t see beyond the end of its own self-importance – it genuinely believes that the solution to all of life’s problems begins and ends in Westminster.
Finally, large organisations like the BBC sometimes struggle to get a feel for the grassroots. In Robert Peston and Stephanie Flanders, the Beeb has one of the most powerful double-acts in the coverage of the global economy.
Yet the end result of that is that their coverage of ‘business’ is dominated by national politics and global economics.
The grassroots – which has proved far more resilient than you would expect given the scale of the crunch - doesn’t appear to get a look in. And this is why I ended up getting an earful last week. I wish Robert Peston had been there...
In itself, the 0.2 per cent contraction was unremarkable. I’d seen enough data and anecdotal evidence to know that growth had been looking like a pancake since the summer.
What was notable was the reaction to some of the coverage of it. News websites were dominated by portentous stories which spoke of an economy ‘lurching towards recession’. Politicians wagged fingers and spoke of double dip as if it were Lord Voldemort.
When I mentioned it to my mate his reaction was one of near despair: “I am absolutely sick to the ******* back teeth with this. It’s been tough for years and you just get on with it. Some people are still doing OK. But what does the bloody television do? They just revel in it.”
Now, his company happens to be doing OK, though business is a hard slog and deals take time to happen because people are cautious. What concerns him is that he believes their caution stems in part from a relentless focus on negative sentiment in the media.
As a journalist of *cough* years’ experience, I always bridle at any suggestion we should ignore ‘bad’ news. News is the world we live in, which is not necessarily the way we’d like it to be. So it’s up to you to decide whether it’s bad or not. And I have a real beef with politicians who are all for press freedom but wish we were a bit more positive (about them).
But there is a serious point underneath what my mate was saying.
Confidence, sentiment or whatever you want to call it, is NOT an intangible concept which is separate from what happens in the real economy. The Bank of England recognises it as a key factor in investment, spending and purchasing decisions and assesses it when it does its own economic forecasts.
So it’s right to ask questions about what influences economic confidence.
The media clearly is an influence because it tells people what’s happening in the wider world – both the hard facts and people’s interpretation of what those facts mean.
There WAS a 0.2% fall in economic output between the start of October and the end of December last year. There IS a consensus that we may see the same again when the figures come out from January to March. If that happens, we WILL have satisfied the technical requirements to classify the period as having been in recession.
But what does a recession really amount to? And has the media got its head round the impact it actually has on our 21st century economy?
My mate’s belief – and he is far from alone – is that the media’s assessment of what recession actually amounts to is a doom-laden cliché rooted in memories of either 1930s dole queues or 1980s factory closures.
Neither are appropriate to where we are now.
In the 1930s, we had a depression, an altogether deeper and more prolonged period of economic contraction made more serious by the lack of a welfare safety net, out-dated economic levers which didn’t allow a dynamic response, and a political class stuck in the past.
In the 1980s, we finally began to confront the reality of an uncompetitive manufacturing sector whose costs, efficiency and working practices had long been outclassed by Germany and Japan, both of whom reinvented themselves in the wake of wartime defeat.
But that was the past.
In 2012, we are the sixth biggest economy in the world, we have a comprehensive welfare safety net, and we have a much more flexible economy which doesn’t get lost in hang-ups about major change and reacts pretty quickly.
Certainly, the view of many people in business that I talk to is that, yes it’s difficult, but not disastrous. Growth is still possible, and if the economy contracted by 0.2 per cent they’re focusing on the 99.8 per cent that’s still happening.
So while the political approaches of the main parties seem pretty traditional, the economy they pronounce on is not the same as it was even 30 years ago.
Is this where the problem lies – that the media is simply echoing the politics of the economy, which are all about heavily-prejudiced interpretations, rather than the reality for business?
The idea that business just gives up and goes home because the GDP figure ticked down a bit is utter tosh. People who run businesses just don’t inhabit that kind of negative universe.
Our attitudes to recession are similar to those we used to have about unemployment. While no one is happy that more than 2 million are out of work, the fuss being made about it is nothing compared to the uproar when it broke through the 1 million barrier in the early 1970s.
Then, with a generation whose memories of the 1930s were still vivid, joblessness was seen as a social cancer to be avoided at all costs. But the government’s attempts to solve it by throwing money at the economy simply caused rampant inflation.
The truth was that unemployment had been rising naturally since the 1960s as our economy began to switch away from out-dated large-scale manufacturing. Today, it’s broadly accepted that if we want a flexible economy with low inflation, some level of unemployment is the price we pay.
So if businesses don’t go into panicked hibernation when recession sets in, and unemployment is a natural consequence of a modern economy, why do the headlines sometimes suggest we are staring disaster in the face?
I’d point the finger at three causes.
One is that the financial crash was a near-disaster, and has caused damage which has gone deeper and lingered longer than a simple, cyclical recession.
Second, London media is dominated by a politics which can’t see beyond the end of its own self-importance – it genuinely believes that the solution to all of life’s problems begins and ends in Westminster.
Finally, large organisations like the BBC sometimes struggle to get a feel for the grassroots. In Robert Peston and Stephanie Flanders, the Beeb has one of the most powerful double-acts in the coverage of the global economy.
Yet the end result of that is that their coverage of ‘business’ is dominated by national politics and global economics.
The grassroots – which has proved far more resilient than you would expect given the scale of the crunch - doesn’t appear to get a look in. And this is why I ended up getting an earful last week. I wish Robert Peston had been there...
Wednesday, 25 January 2012
UK plc: a recession or a hiccup?
Today’s news that the UK’s GDP figures fell by 0.2 per cent in the last three months of 2011 will generate the usual stale, political hot air.
But I doubt it comes as any great surprise to anyone in business.
The GDP figure had already been comprehensively second-guessed by a series of business surveys which suggested that sentiment had been weakening from the summer onwards.
You have to attach the usual health warning to today’s number. This is actually an estimate from the Office for National Statistics based on its analysis of around 40 per cent of the data which goes into the GDP figure.
It will be revised at a later date, and past revisions have usually been upwards.
What’s behind the fall? A couple of interesting contributing factors – a mild winter has seen people turn down their heating, so electricity and gas production was down more than four per cent. November’s public sector strike – which took out the equivalent of a million working days – will also have nicked the number down a bit.
But they can’t hide falls in manufacturing, construction and a standstill in services, all of which tell a familiar story of weak demand in a cautious economy.
This is also a significant reverse on the third quarter of 2011, when the economy grew by 0.6 per cent. So the slowdown was a marked one.
There is no sign of any immediate improvement in this picture, and it won’t be in the least bit surprising if we see another negative number for the first three months of this year, especially with the continuing uncertainty in the eurozone – our main export market, don’t forget – acting as a drag on the global economy.
There are some optimistic chinks, though, and some of the sentiment I pick up from business people is that they’re getting pretty fed-up with the political doom-mongers.
Inflation is expected to continue falling this year, which should allow businesses to start rebuilding profit margins and consumers to feel like they’ve got a few quid spare. Tax changes for low and middle-income earners are likely to have a similar effect.
So the UK economy should get back on to a slow path to recovery in the second half of this year.
I’ll repeat a few salient points about where UK plc is right now: a swift recovery from a devastating financial crash was never likely because we are dealing not just with huge debts but the need to make structural change to an economy which has lost some activity permanently.
Our economy isn’t falling apart at the seams, because it is the sixth biggest in the world and has a welfare safety net which didn’t exist in the 1930s.
Businesses may be heartily sick of recession talk, but they’ll have to tolerate it for a few months yet. Nevertheless, this isn’t a return to the dark days of the crunch.
But I doubt it comes as any great surprise to anyone in business.
The GDP figure had already been comprehensively second-guessed by a series of business surveys which suggested that sentiment had been weakening from the summer onwards.
You have to attach the usual health warning to today’s number. This is actually an estimate from the Office for National Statistics based on its analysis of around 40 per cent of the data which goes into the GDP figure.
It will be revised at a later date, and past revisions have usually been upwards.
What’s behind the fall? A couple of interesting contributing factors – a mild winter has seen people turn down their heating, so electricity and gas production was down more than four per cent. November’s public sector strike – which took out the equivalent of a million working days – will also have nicked the number down a bit.
But they can’t hide falls in manufacturing, construction and a standstill in services, all of which tell a familiar story of weak demand in a cautious economy.
This is also a significant reverse on the third quarter of 2011, when the economy grew by 0.6 per cent. So the slowdown was a marked one.
There is no sign of any immediate improvement in this picture, and it won’t be in the least bit surprising if we see another negative number for the first three months of this year, especially with the continuing uncertainty in the eurozone – our main export market, don’t forget – acting as a drag on the global economy.
There are some optimistic chinks, though, and some of the sentiment I pick up from business people is that they’re getting pretty fed-up with the political doom-mongers.
Inflation is expected to continue falling this year, which should allow businesses to start rebuilding profit margins and consumers to feel like they’ve got a few quid spare. Tax changes for low and middle-income earners are likely to have a similar effect.
So the UK economy should get back on to a slow path to recovery in the second half of this year.
I’ll repeat a few salient points about where UK plc is right now: a swift recovery from a devastating financial crash was never likely because we are dealing not just with huge debts but the need to make structural change to an economy which has lost some activity permanently.
Our economy isn’t falling apart at the seams, because it is the sixth biggest in the world and has a welfare safety net which didn’t exist in the 1930s.
Businesses may be heartily sick of recession talk, but they’ll have to tolerate it for a few months yet. Nevertheless, this isn’t a return to the dark days of the crunch.
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