Wednesday, 2 September 2009

Summer's greenshoots, autumnal rain ahead

Forecasting the economy can be as unpredictable as forecasting the weather. Just ask Gordon Brown. In 2007 he told the City of London it was on the verge of "a new golden age".

Statistics released over the summer revealed the UK economy shrank by 0.7% in the second quarter - far less than the 2.4% drop in the first quarter of the year. Throughout the summer too, the stock market (both here and in the US) steadily rose, and the housing market rose.

However, there was bad news in the latest UK manufacturing figures and unemployment continues to rise - to nearly 2.5 million on the ILO measure.

One comforting statistic over the summer was the decline in the personal debt mountain which was responsible for a massive rise in personal bankruptcies, insolvencies and repossessions over the last few years. Oh yes, and such irresponsible lending by the banks also led to their collapse - nearly dragging the entire economy with it.

So how did the Bank of England and BBC react to people paying off their debts? With joy or just a prudent encouragement? No, the BBC's Hugh Pym stated "in theory, paying off some of the £1.4 trillion mountain of consumer debt is desirable. But a tendency for people to reduce debts rather than spending may not be helpful to an economy still in recession."

Quite right Hugh, more debt for the proles, that's the solution! Sadly the BBC doesn't say it's unhelpful when workers' pay, benefit levels, or pensions are cut in a recession . . .

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