Tuesday, 25 January 2011

Economic shock a warning

I could be all tribal and also claim like the chancellor that the economy contracted by 0.5% in the last three months of 2010 because of the snow. But while I can see this being a factor, Manufacturing still went up by 1.5% which means the weather was not an overriding factor as manufacturing workers still turned up to work and good where still delivered and made.
I think that this is generally a very bad sign for the coalition as well as the country. It's a shock for a reason, because its so unexpected. The construction industry fell the most, decreasing by 3.3% in the quarter. This I expect is down to so much spare capacity in the commercial sector and the very slow housing market.
Of course politically the government will claim that this is not down to policy and they won't change their plans. But If this continues I expect the government to change their plans accordingly. This is because if the parties in the coalition want to win votes then they will need to keep the economy on track, otherwise you can expect Labour to win a majority in the next general election.
Coalition, You have been warned!

I'm not the only Lib Dem who is worried see Caron's Musings post, http://carons-musings.blogspot.com/2011/01/ok-im-scared-about-economy-now-lib-dems.html


  1. I think the point about the snow is that bad weather clearly affects some industries more than others. It's no surprise to see construction had a bad Q4 given that most of the work is outside, and it is simply not possible to continue with a lot of it in freezing, snowy conditions.

    Factories, on the other hand, can of course run while in any weather, and much modern manufacturing is not particularly labour intensive, meaning it's not that reliant on large numbers of staff turning up.

    The other point is that actually it is fairly usual to have the odd quarter of contraction during recoveries. It is simply not possible to tell that much from one quarter of figures. One quarter of contraction does not a trend make.

    I don't think there's any need to panic unduly now. Yes, the government should be prepared for a downturn, but I think that is still far from likely. The next quarter's figures will be very important.

  2. Shock? Unexpected?

    Lib Dems spent the first half of last year warning everyone that this would happen if public sector cuts happened to quickly, now it has. In the interim, most respected economic commentators, thinktanks, etc, have reiterated our pre-election position. I'd of been more shocked had we not experienced a downturn, and I'll be pleasantly surprised if the next quarter is much better.

    This is when things changed : http://www.bbc.co.uk/news/10151510

    What makes you think the Lib Dems were so wrong in the election campaign?

    I trusted Vince when he said what Vince thought, but now I'm not so Con-Vince'd. ;)

  3. This is not the result snow or of coalition cuts, they haven't even started yet. It is the result of 8 months of the most disgraceful and reckless politically motivated behaviour of any government in modern time, for a member of the British government to say that Britain is BANKRUPT fucking unbelievable!

    I've seen every body from Cameron and Clegg to lowly lobby fodder defend any stupid half-baked cut by saying Britain is broke. You only need look at business and consumer confidence surveys to see them fall of a cliff once the tory-libdem propaganda machine got going to see what has happened. It is an absolute scandal for the coalition to try and use deficit reduction as cover for ideological cuts to shrink the state.

  4. It wasn't a surprise to Paul Krugman, a Nobel prize winning economist whose articles I forward and post on Facebook frequently.

    As for snow - all these headlines "Weather costs economy one trillion dollars" etc are just hyperbolic scaremongering.

    I've said before, people have a set amount to spend. They still need to eat, they still socialise. If snow keeps people indoors one week, that merely means they have more to spend the following week. You might be unable to buy fresh food one day, so live off of canned and frozen food (that later needs replacing) until you can get out to buy more fresh groceries.

    I very much doubt the students, the drinkers, the clubbers, the theatre-goers etc of this country went "Oh look, it's snowing, so let's put the weekends spends into savings and deprive the economy of our cash shall we?"

    It's a shame that 'Anonymous' posts so anonymously, because he hits on some very astute points....