There seems to be a host of postive news about the economy - GDP growing, one of the few Western economies which is, and the economy is now as large as it was before the 2008 crash...
Retail sales are buoyant, car sales increasing, consumer confidence growing, unemployment falling...
But even living in London I'm not sure people are feeling it...
Houses are unaffordable to even wealthy middle class dual-income first time buyers
A fifth of people in UK struggling to pay their mortgages (rates forecast to be at 2.5% by end 2016 so this can only get worse)
Wages aren't even keeping up with inflation - and haven't been since pre-crash
Falling living standards
Record levels of personal debt
Food banks/pay-day loans, which haven't been so popular for as long as I've been alive (born 1973)
National debt is still increasing, with more cuts yet to come
Strengthening pound making UK exports expensive and therefore hitting UK exporters
Dire savings rates (2 weeks after opening my ISA, First Direct dropped the interest rate from 2% to 1.5% with no explanation and no move in the Bank Base rate...)
Official forecasts suggest the outlook is positive, albeit not booming but I can't see where it can come from...
So what's the general feeling out there?
No doubt that things are picking up, the questions are how sustainable is the footing* (ish) and what is happening to productivity (still poor). Plus the output gap is still wide so no wonder wages are not responding! Low productivity rates and spare capacity is not good for the pay in our pockets.
*You are correct to point out the debt stats - austerity what austerity? GO took the foot of the gas on that one. Plus overall debt levels are still too high across most sectors. This will remain a constraint on future growth.
And IR too low - off course that is a deliberate policy. Take from the savers and give to the debtors. This will continue for some time. How else will they shrink the debt burden - a UK default? (We did it in the past!)
They said they were going to restructure the economy. And fair play to 'em, they have. Except in the opposite direction from the one it needed to go in
Its a 'recovery' built on exactly the same house of cards as that got us into this mess in the first place. Cheap consumer credit, bonkers housing market increases. The same short-termist Financial markets having a bonanza, and paying themselves the proceeds
Theres been no increase in productivity, business investment is at all time low
Add to that falling living standards, zero hours contracts etc, and you've successfully sown the seeds for the next economic shit-storm. And it really is when, not if.
But... and this is the bit that counts... the richest in society were not only not effected by the crash, they've done really really really well out of it. The top 1% has seen their wealth go into the stratosphere. The ones who caused the whole debacle have walked away scott free (instead of being strung from *ing lamp-posts!) and its snouts in the trough, business as usual
So from the Tory perspective.... ker-*ing-ching!!!! Mission accomplished!!!!
Funnily enough, I was promoted last week and had a pay rise (first above inflation for quite some time), despite a profit warning from my employer...and just found out 10 minutes ago that mrs pf has been made redundant. So mixed feelings about economic recovery at the moment.
Our village had no empty shops at Christmas. We now have 5.
Something is still a bit wrong even in a very affluent area.
Consumer credit has not really taken off, Housing recovery patchy to say the least, financial players had really crap 1H results and income inequality has reduced. So not quite Binners!
Look on the bright side, the IMF predict that the UK will grow faster than any other leading economy.
The funny thing will be how GO spins this in relation to 'his' policies. The gap between rhetoric (and criticism) and reality in Econ policy is pretty wide
So from the Tory perspective.... ker-****ing-ching!!!! Mission accomplished!!!!
Have you been watching the labour policy reviews over the past week? You could have out any party in that first sentence as the policies were broadly the same and largely pre-determined by external events and necessity than any political imperative. Govs mainly react to events in front of them.
Repeat after me:
An increase in house prices [b]is not[/b] economic growth
much better to run an economy by saying the word 'prudent' in every sentence for 10 years, and if you say it enough times you'll convince yourself it must be true. then dump it on a guy with grey hair and black eyebrows just at the point that the excrement is about to hit the aircon.
shame all the political parties last time out were trying to make the other side have to run the economy while it was fscked up, cos they didn't want to have to have the negative PR for 5 years.
binners - Member
Repeat after me:An increase in house prices is not economic growth
No but an increase in the wealth effect is a well known and obvious way of stimulating consumption
Agg Demand = C + I + G + X - M
With C being consumption. Rising asset prices stimulates C as we have just seen as do IR (low), confidence (recovering) etc
THM - there is a growing understanding that economics isn't driven by formulas as people do not act rationally - rationally as defined by economists...
An alternative interpretation of the impact of rising property prices is that it hovers up increasing amounts of income on non-economic activity that otherwise would be used for consumption that drives the economy.
All these are theories and essentially impossible to test as there is always so much else going on in an economy at any given time. Economist build models and draw graphs that self fulfil their theories - its enough to make natural scientists weep.
Olddog - beat me to it
took me fricking ages to type out all that pap i was giong to post too.
THM did you hear Laffer on R4 this week - neo-liberal BS at its finest
I'm a freelance adverting/design/editorial photographer. I didn't get a whole 2 day weekend off from Jan-June and only this month have I had weekends off and although it's usually quiet due to holidays/schools I have still been shooting/retouching and banked what I call a decent month when previously I wouldn't have done much at all in July.
I think I have earned a yearly salary that I'm comfortable with already so with 5 months to go its definitely been a good year, some of the work I do is in high-end luxury markets so I guess that's where a lot of the growth is.
I know one person out of work but I don't think he's desperate to find another job as his payout was a good one, I'm not seeing much in the way of belt tightening here in London
It's an identity not a formula, so wrong thing to weep about. Scientists should know the difference 😉
But what the dismal science (sic) does show is that indeed there is no such thing as a free lunch. Rising asset prices are all very well if you own the asset. Not good if you are looking to buy. But if governments want to distort the free market in housing - even capitalist Tories (?), then that is the range of outcomes in practice (as well as theory)
An alternative interpretation of the impact of rising property prices is that it hovers up increasing amounts of income on non-economic activity that otherwise would be used for consumption that drives the economy.
Indeed. Another example of this nonsense is 'Funding for Lending'. Government make billions of public money available to the banks specifically to fund lending to business, and support growth
What did they do with it?
They leant it all out in mortgages instead, as it was lower risk, and more profitable for themselves. The result: another out of control housing bubble. Its the economics of the madhouse. And its only going to end in the same depressingly familiar fashion as the last time
But if governments want to distort the free market in housing - even capitalist Tories (?)
That Gideon is playing games with the housing market to me is a massive warning sign - if there was a real, sustainable recovery feeding through to the electorate - and likely to be that way by the time of the election - then he wouldn't have had to do it would he?
It strikes me as a lack of confidence in his own policies. And if Tories feel the need to manipulate free markets to get themselves re-elected we really are in trouble!
Can anyone else see a pattern in this graph?
[img] 
[/img]
OP no - got a promotion this month but paypacket today says no more cash in it. So no but on the upside it's all HRs fault and the economy is in sparkling* shape. Frickin HR.
*until all the oligarchs disappear to switzeralnd with their respective cuts of Russia's former sovereign wealth.
Well when IR finally start to rise, the indebted will be hit hard and the Tories will have another problem to address. Debt was the cause of the crisis, and remains the shadow over the economy now.
got a promotion this month but paypacket today says no more cash in it.
I'm a contractor so this doesn't affect me but there's been a reorg in my place over the last couple of months and apparently pay rises have not accompanied promotions and increases in responsibility - suggests there's not a lot of cash around.
My client/employer's revenues are very closely linked to UK consumer expenditure...
Eldest about to start secondary school, so suddenly lots of extra costs to find. For the first time we have had to say "no" to a day out for him proposed by some friends as we didn't feel it was worth the relatively small cost. I've had to turn down a weekend away with mates, just not got £100 or whatever to spend on that rather than other priorities.
The joys of both of us being in tbe public sector. Still, MrsMC may have chance to work extra hours after September, mortgage will be off by Christmas, at which point the main car will be ready to shuffle off this mortal coil.
However, a couple of mates have just landed better paid jobs, there is some movement in some sectors for those with the right skills and experience.
Would have been just as bad whoever won the last election, really wasn't the one to win. Labours saving grace is we will never know if it would have been any worse with them in charge.
They leant it all out in mortgages instead, as it was lower risk, and more profitable for themselves. The result: another out of control housing bubble. Its the economics of the madhouse. And its only going to end in the same depressingly familiar fashion as the last time
I was a bit taken aback by the stupidity of that, all they needed to do was to keep manipulating the interest rates so a very gradual low growth or (flat growth with inflation) of house prices with no crash or boom and we would all have been better off. Not a finance expert but I was hoping the governor would let the chancellor know how stupid this was and try to act accordingly. But as has been already pointed out they just want an election winning growth headline and worry about the time bomb later.
Remember when CMD said, you can't solve a debt crisis, by adding more debt (words to that effect)......!?!?
A bike cafe opened in my village, a good sign...?!
Not a finance expert but I was hoping the governor would let the chancellor know how stupid this was and try to act accordingly.
Mark Carney was a politically appointed place-man for Osbourne. He was never, and will never, go against the wishes of his master. No matter how short-termist and idiotic they are
Why would any employee wilfully ignore the mandate given to him by his boss?
But Carney is hardly a muppet
Given the speed of the recent economic revival, the Bank of England has been inching closer to raising interest rates from their record low of 0.5 per cent. In a speech this week Mark Carney, BoE governor, said the economy “is starting to head back to normal” and as it does so, “[the] bank rate will need to start to rise in order to achieve the inflation target”.But the bank is worried that any rise in interest rates might hit Britain’s fragile recovery if households cut spending rather than risk getting into trouble with their mortgage lenders.
The double edged sword I was talking about
I was a bit taken aback by the stupidity of that, all they needed to do was to keep manipulating the interest rates so a very gradual low growth or (flat growth with inflation) of house prices with no crash or boom and we would all have been better off. Not a finance expert but I was hoping the governor would let the chancellor know how stupid this was and try to act accordingly. But as has been already pointed out they just want an election winning growth headline and worry about the time bomb later
BoE interest rates do a lot more than determine mortgage rates - if that was the only function it would be a much easier job. More important is the need to set a rate that allows sufficient lending into business that stimulates growth but does not drive inflation. Low rates, in theory, should encourage people to spend rather than save - but in practice that spending seems to be having an inflationary effect on property.
I have no real idea on how you solve all this - if wage increases are low consumption growth will be low and if consumer debt isn't rising then GDP growth is affected. But do we really want to go down the road of debt driven consumption?
back to the OP - I think it depends a lot where you live. I live outside Leeds and in the city the shiny new shopping centre, packed restaurants and bars etc would suggest good times are back - then take a 15 minute train ride to Bradford (or out to East or South Leeds for that matter) and see the other side of the recovery...
you asked how we felt...
I feel about the same, not having a party but keeping head above water, have been pleasantly surprised I've managed to more or less tread water but dont believe the underlying financial structure is solid, just not about to fall over. I guess thats a little improvement.
Back to the OP - more confident indeed might finally buy a decent bike - especially as there is now £400 off in the sale!
GDP is up but GDP per capita is still below the 2008 peak.
Binners you may or may not be interested in some of the detail today
Financial services weak -14% - so much for feeding the boys in the City
Consumption is flat versus 1Q2008
Correct, investment is weak, very weak in fact 🙁
So where is the growth coming from?
The main drivers - government (under the Tories???) and net trade (in cash terms gov spending has tailed off more recently accepted)
GDP should be considered on a per capita basis at the very least. In this case it is 4% below the peak - there are almost 3m more people in UK pop. Of course, politicians don't use this stat!!
But the job market - stronger in every segment!!! The flip side, dreadful picture in terms if productivity and hence wages
Household debt hardly changed in relation to GDP, we still have too much debt!!!
So not really the picture presented in the media!!!
Lets not forget that a sizable contributor to this great news GDP is 'imputed rent'. Laughable.
Financial services weak -14% - so much for feeding the boys in the City
Since when did the performance of any company in the financial sector bear the slightest link with what 'the boys in the city' pay themselves? Thats the whole problem! Theres been a total disconnect for decades. Somewhat unbelievably this seems to have [url= http://www.theguardian.com/business/2014/feb/11/barclays-hikes-bonuses-profits-slide ]got worse![/url] since the crash. You really couldn't make it up!
[i]Barclays condemned over £2.4bn bonuses - Payouts up 10% despite profits fall and job cuts. Bank's boss says he cannot control market-led pay[/i]
That serves as a perfect illustration of who exactly is benefitting from the so-called recovery.
As I said earlier. They've got away scot free. Trousered all the cash, then just walked away from the chaos they created. Yet incredibly, they remain totally unreformed, and they're using the same bankrupt, totally discredited neo-liberal claptrap to justify their continued mind-boggling greed, and begger the rest of the country, and the 'real' economy!
Like I also said earlier - They should be hanging from ****ing lamp-posts!!!
Binners is spot-on IMHO.
If it sounds to good to be true it usually is.
But... and this is the bit that counts... the richest in society were not only not effected by the crash, they've done really really really well out of it. The top 1% has seen their wealth go into the stratosphere. The ones who caused the whole debacle have walked away scott free (instead of being strung from *ing lamp-posts!) and its snouts in the trough, business as usualSo from the Tory perspective.... ker-
*ing-ching!!!! Mission accomplished!!!!
The Tories must have been rubbing their hands with glee at the possibilities for furthering their own interests under the pretence of 'restructuring' when they came to office in the aftermath of Labour's economic calamity.
After all, you never let a good crisis go to waste.
Well I think if my income rose by 0.8% I wouldn't notice a thing.
Me, my business has made more gross profit in the first 17 weeks of this fiscal year than the whole of 2010.
**burns £50 note**
I think the Tories might have gone mad. There's clearly a whole big mess sitting underneath the patina of good news stories.
They're putting a positive spin on the situation so they can win the election. But it'll be after the election, when interest rates go up and growth slows that the debt and weaknesses will crystalise.
And who'll be in power? The Tories... so they're just setting themselves up for 3 terms out of office again...
Surely they'd be better off admitting it's not great but pointing out they've kept things from getting worse than the mess they inherited. They should let Labour win the election, who will then screw up the economy completely, and allow the Tories to walk back into Downing St for another 3 term session! Worked for Maggie 🙂
Then again I see people at work create massive screw ups for themselves without apparently being aware they;re setting themselves up - and then seem genuinely shocked when they finally get called on it. I guess power makes people's heads go funny...
Well I know the job market continues to ask for the moon on a stick but want to pay lukewarm salaries.
We've still got the brunt of the Austerity cuts in public spending to come, they were all back loaded.....
Well lots of people are putting a positive light on the UK performance not least the IMF who were telling the Tories to change tack not that long ago. At least, they have swallowed their pride now.
TBF to GO he has been playing down the prospects for several months. Despite his best intentions to show otherwise he is not completely ignorant of what is going on (which is why actual policy is very different to what they pretend and others state)
Just a pity for poor old Alex Salmond looking at how badly NS and financial services are doing right now!!!!
The job market is on some sort of hallucinogenic substance.
Recently redundant and all that's on offer* is more responsibility and more commitment wanted for half the salary.
My solution has been to take half my past salary but do something I enjoy and use some of my redundancy money to clear all my debts off. We have cancelled all subscriptions and recurring discretionary payments and will now live month to month and not take on any long or medium term financial commitments or anything else that requires a commitment to future payments.
Feeling rich at the moment with our "booming" economy? no, but in one sense, sort of.
*I use the word 'offer' in the sense that someone has advertised it, not that it actually exists.
teamhurtmore - Memberbinners - Member
Repeat after me:An increase in house prices is not economic growth
No but an increase in the wealth effect is a well known and obvious way of stimulating consumption
We don't need consumption, we need production. Production for export just like the German economy. Otherwise the UK (with it's blinkered obsession with house prices and personal debt) will continue to decline, each and every year whilst we continue to consume and import more than we export.
I don't agree with Binners. Unlucky.
Rebel - indeed which is why a surprisingly strong performance from net exports since the crash has been good news. That has been a bigger contribution than consumption to the recovery. Exactly what you are saying.
Do you want to thank the coalition or shall I? 😉
Well lots of people are putting a positive light on the UK performance not least the IMF who were telling the Tories to change tack not that long ago. At least, they have swallowed their pride now
This the same IMF that didn't see the banking crisis coming? Well theres a credible reference then.
According to TradingEconomics, exports have been pretty flat since 2011 and are now falling?
Its all PR in the run up to the election.
Sainsburys near me has got rid of nearly all its till staff recently, its just machines in there now, same with several other local shops. So more people on the dole, more families with less income, less customer service, less people with money to spend, more taxes going to support the unfortunates on the dole while all the roads, libraries, local maintanance, health service etc go even further down the pan or vanish totally. They even took all the dog litter bins away from here so that they did not have to pay staff to empty them, they have sunk so low financially.
A friend who has been made redundant for the 2nd time in 18 months says there are even less jobs about to apply for than last time and it was bad enough back then.
Pretty much everything unless highly skilled seems to have dropped down to minimum wage or less than a pound above it.
More and more zero hours contracts despite bad publicity.
Load of fat cats just got great pay rises for their Board level jobs - so alls well really then. For some. More money at the top is all that counts.
According to TradingEconomics, exports have been pretty flat since 2011 and are now falling?
City AM carried a similar story about how poorly exports are performing
The IMF (and WB, OECD etc) are in a state of flux policy wise. They are still reeling from the failure of their analysis in the lead up to 2008.
They can see that they missed something and that something needs to change to avoid the same thing happening again - but are struggling to understand what to do on both. The answer at the moment is around reducing inequalities both domestic and inter-nation but with no real idea how to do this and nothing vaguely approaching a consensus.
I was referring to the period between the crisis and now as this is what the headlines are about.
Since then, consumption is flat, investment is down, government spending is up and net exports are up. Surprising, but true especially given the weaknesses in our core export markets.
The IMF are indeed in a pickle - not least having a French woman at the head. It must stick in her elegant throat to compare the performance of UK v France at the moment 😉
In term of exports I'd have thought we need to focus on high end ie innovative and where UK brand adds value. We are always going struggle on generic mass production where low labour costs are a big factor.
To do this we need an up-skilled workforce - which requires investment, not austerity...
Import substitution with domestic production is another avenue - increased transport costs help with onshoring this type on manufacturing, but I can't see it being much more than niche.
I've we can't pull this trick off I think we are doomed to some sort of levelling down as China and India level up. Not the greatest prospect. Then again I am a natural pessimist
The IMF are indeed in a pickle - not least having a French woman at the head. It must stick in here elegant throat to compare the performance of UK v France at the moment
... but French productivity is higher, which always boggles my mind. I do wonder about how well all these stats are put together/compare internationally
To do this we need an up-skilled workforce
But instead we concentrate on academic qualifications to the point where you need a degree to work in a call centre.
To do this we need an up-skilled workforce - which requires investment, not austerity...
Stop talking left wing socialist tosh!
What we need is a flexible workforce, zero hours, no pension rights, no employment rights, no skills, just low wages and everything will be great (if you're a billionaire).
footflaps - Member
To do this we need an up-skilled workforce - which requires investment, not austerity...
Stop talking left wing socialist tosh!
left wing socialist tosh!!!! That's classic supply-side economic policy. How to produce more output at a lower price level? Education and up-skilling the workforce is an essential part of SS policies. And who was the last major political figure to bang on about SS policies.......? 😉
I blame everything on the public sector
But instead we concentrate on academic qualifications to the point where you need a degree to work in a call centre.
And an MPhil to be a Barrista 🙂
I blame everything on the public sector
You are John Redwood and I claim my £5!
isn't cross-posting a capital offence?
It's for charidee, though.
In answer to the OP, definitely not I am a public sector worker (i'm actually quite a nice person!) and the had 0% pay increases in 2010-2012 and 1% pay increases for the last 2 years, coupled with increases in my pension contributions mean my take home pay is substanially less than it was in 2009 (don't get me wrong i don't mind saving for my retirement but when you get turned down for a mortgage because "You pay too much into your pension" you realise that perhaps the balance has swung to far the other way). And with inflation out stripping wage rises the way it is i'm definitely not feeling it.
even more unbalanced than ever, looks like the banks gobbled up QE and kept it to themselves.
[img] 
[/img]
The Germans reached the same position back in 2010, 2011 for the US & France.
even more unbalanced than ever, looks like the banks gobbled up QE and kept it to themselves.
Kind of. They appear to have dished it out as mortgages to people who can't afford to get in any more debt!
Remember when people said QE would cause inflation - and a year later we had 20% increase in London house prices when everyone's still skint? No causality, obviously 😯
No we don't feel richer and we shouldn't. As a nation we're poorer. The GDP is about where it was before the crash but there are 2 million more people in the country than there were pre crash, so we are all poorer. There is no cost of living crisis. Actually, I'd say we're not poorer now than we were, we were just not as rich as we thought we were pre crash.
This rebalancing of the economy isn't what people are expecting too. Forget a return to heavy industry employing hundreds of thousands of people. Manufacturing has moved on. These new manufacturing jobs will be highly skilled, high tech jobs, more akin to IT.
According to the 'experts' on R4 It's the hourglass economy we'll have apparently. Lots of low skilled low paid jobs at the bottom, with more high skilled, high tech, very well paid jobs at the top with an absence of the high volume reasonably well paid blue and white collar and middle management jobs. So doing well at school and getting the right degrees and qualifications that are useful to real life will be much more important. Sounds scary to me, a proper two tier society.
Education, education, education..... 😉
It's was help to buy rather than QE that had the direct impact on housing, but the housing bubble is very localised. The ONS has already suggested that this data is likely to be revised up. This recession has been notable for its length but it's fortunately surprisingly limited impact on employment compared with past recession.
Wasn't the rebalancing more away from financial services and public sector? The former has not done as well as the services line above suggests.
You're bang on! The economy is being stripped of those middle income jobs, in the same way as it was stripped of manufacturing jobs in the 80's. They're being outsourced abroad, and made redundant through technology.
And a lot of what's left will be subject to a race to the bottom. As the supply of educated, skilled workers compete for far fewer positions, employers have used the opportunity to slash salaries. I reckon my own industry has seen a 20 - 30% cut across the board since the crash. I can't see this changing any time soon. They're falling further behind year on year. There's no way they're going to get back to anything like the previous levels .
In the long term I can't see how this sustains our economy, other than the same taking on of cheap credit to prop up falling living standards. And we all know how that ends.....
Address two underlying problems - debt and low productivity. Neither are short term fixes sadly.
My older one has two summer jobs/internships - one serving others and being paid the min wage, the other using his education in a more cerebral environment and being paid well. His views on the relative merits/demerits are interesting as are his obvious future choices to avoid the hourglass.
I think my wife's feeling rich, just bought me some new shoes even though there's plenty of life left in my old shoes.
In answer to the op, yes. And I've managed to give a 2.5% raise, plus bonuses plus merit rises in the last 2 years, and there should be more if the same this year. Out market place (home improvement / development) is looking very good right now.