Tag: GDP

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UK economy flatlines

UK flatlined

The U.K. economy flatlined in the third quarter, initial figures showed Friday 10th November 2023.

Gross domestic product (GDP) showed zero quarterly growth in the three months to the end of September 2023, following an increase of 0.2% in the previous quarter. In annual terms, the UK’s Q3 GDP was 0.6% higher than in the same period in 2022.

Services sector output dropped 0.1% on the quarter, but the decline was offset by a 0.1% increase in construction performance, while the production sector flatlined.

U.K. Chancellor of the Exchequer Jeremy Hunt said high inflation remains the ‘single greatest barrier to economic growth’ in the country, with the consumer price index remaining at 6.7% year-on-year in September 2023.

UK economy flatlines as inflation sticks at 6.7% year-on-year as at September 2023.

‘The best way to sustainably grow our economy right now is to stick to our plan and knock inflation on its head’, Hunt reportedly said.

It’s useful to know the government have a plan, even though they were very late to the inflation party! Guess they were sidetracked with all the other parties at No.10!

‘The Autumn Statement will focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs’.

Up until September 2023, the Bank of England (BoE) raised interest rates 14 consecutive times to try to influence the UK ‘product and service’ price climb.

Red flags

Interest rates are now at a 15-year high of 5.25%, and are expected to remain high for some time to come. Bank Governor Andrew Bailey reportedly said last week it was ‘much too early’ to be considering rate cuts.

Thank you Governor Baily – it so comforting and reassuring to know that the very people who missed the red inflation flags are still in charge of policy.

Transitory?

Remember, the BoE and others originally suggested inflation would be transitory – I suppose it is, if given years to move back down. What did you think was going to happen after all that borrowing and the country crawling back to work after the pandemic.

Nice job guys! Don’t forget to collect your paycheque on the way out!

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The Fed is ‘not confident’ according to Jerome Powell

Fed

Fed Chair Jerome Powell reportedly said he and his colleagues remain steadfast in getting policy in line with their 2% inflation target, but ‘we are not confident that we have achieved such a stance’.

He stressed the Fed nevertheless can be cautious as the risks between doing too much and too little have come into closer balance.

Federal Reserve Chairman Jerome Powell reportedly said Thursday 9th November 2023 that he and his fellow policymakers are encouraged by the slowing pace of inflation but are unsure whether they’ve done enough to keep the momentum going.

Inflation battle

Speaking a little more than a week after the central bank voted to hold rates steady, Powell said in remarks aimed at the International Monetary Fund (IMF) gathering in Washington, D.C., that more work could be ahead in the battle against high prices.

The statement comes with inflation still well above the Fed’s long-standing goal but also considerably below its peak levels in the first half of 2022. After 11 U.S. rate hikes, we have witnessed the most aggressive policy tightening since the early 1980s, the FOMC have increased rates from pretty much zero to a range of 5.25%-5.5%.

Those increases have coincided with the Fed’s preferred inflation gauge, the core personal consumption expenditures price index, to fall to an annual rate of 3.7%, from 5.3% in February 2022. The more widely followed consumer price index peaked above 9% in June of last year.

Progress

Powell referenced the progress the economy has made. Gross domestic product (GDP) accelerated at a ‘quite strong’ 4.9% annualised pace Q3 2023, though Powell also said the expectation is for growth to ‘moderate in coming quarters’. He described the economy as ‘just remarkable’ in 2023 in the face of a broad expectation that a recession was inevitable.

Nothing like a massive ‘self-pat’ on the back for a job well-done? Remember the Fed’s initial analysis? IT was for inflation to be ‘transitory’. They didn’t get that right either.

Futures pricing, according to the CME Group, suggested there’s less than a 10% chance that the FOMC will approve a final rate hike at its Dec. 12-13, 2023, meeting, even though committee members in September pencilled in an additional 0.25% rise before the end of 2023.

Impression drawing of Fed Chair. The Fed is ‘not confident’ according to Jerome Powell.

Traders anticipate the Fed will start cutting rates next year, probably around June 2024.

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U.S. GDP grew at a 4.9% in September 2023

U.S. GDP

According to the latest data from the U.S. Bureau of Economic Analysis, the U.S. GDP grew at a 4.9% annual pace in Q3 of 2023, better than expected. 

This was the fastest quarterly advance in nearly two years, driven by robust consumer spending, increased inventories, exports, residential investment and government spending.

Challenges

The U.S. economy faced several challenges in the third quarter, such as high interest rates, inflation pressures, and global headwinds, but still managed to overcome them and show strong growth. 

However, some analysts expect a slowdown in the fourth quarter and in early 2024, especially if the Federal Reserve implements another interest rate hike and the housing market remains sluggish and if consumer spending shows signs of slowing.

GDP and Inflation

The GDP report also showed that inflation rose 3.7% in September 2023, down from 9.1% in June, but still above the Fed’s 2% target. The Fed is expected to keep its policy tight and may announce a tapering of its bond-buying program next week.

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U.S multi trillion-dollar debt

U.S. Debt

The amount of U.S. debt is a complex and controversial topic that has different perspectives, implications and opinion.

According to the U.S. Treasury Fiscal Data, the national debt of the United States was $33.52 trillion as of 23rd October 2023.

This includes both the debt held by the public, which is the amount the federal government owes to outside entities such as foreign governments, corporations, and individuals, and the debt held by federal government accounts, which is the amount the federal government owes to itself, such as trust funds and special funds.

Is U.S. debt a problem?

Some argue that the U.S. debt is a problem because it increases the risk of a fiscal crisis, reduces the government’s ability to respond to emergencies, imposes a burden on future generations, and lowers the nation’s creditworthiness.

Others contend that the U.S. debt is not a problem because the U.S. can always print more money, (isn’t this why there is so much debt already)? Borrow at low interest rates, (not easy in the current climate), stimulate economic growth, and benefit from its status as the world’s reserve currency.

So, is U.S. debt a problem or not? It depends on various factors such as the size, composition, and sustainability of the debt, as well as the economic and political context in which it operates.

Most analysts and policymakers agree that the U.S. debt is projected to grow faster than the economy in the long-term, which could pose significant challenges for fiscal policy and economic stability. Therefore, it is important to understand the causes and consequences of the U.S. debt and to find solutions that balance the trade-offs between spending and income.

Debt in relation to GDP

The U.S. debt of GDP was estimated to be around 120% to 130% in 2023.

The U.S. debt of GDP is the ratio of the total public debt of the United States to its gross domestic product (GDP), which measures the size of the economy. 

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UK GDP grew in August 2023

GDP

U.K. Gross Domestic Product (GDP) grew by 0.2% in August, the Office for National Statistics (ONS) reported Thursday 12th October 2023, slightly recovering from a downwardly revised 0.6% contraction in July 2023.

Services output was the main contributor to growth in August 2023, adding 0.4% on the month to offset a fall in production output of 0.7% and a decline in construction output by 0.5%.

This data shows early signs of a cooldown in the labour market and thus, lower inflation further down the economic road.

Bank outlook

The data and outlook for the Bank of England (BoE) suggests that Bank rate increases do not have much upside from here and will most likely remain at current levels, but for a longer period.

The UK economy returning to growth in August 2023 has re-kindled expectations that interest rates will be left unchanged again in Novemeber 2023.

The economy grew marginally by 0.2% in August following a sharp fall in July 2023.

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UK economy contracts July 2023 due to… rain!

UK GDP contracts

The UK economy shrank more than expected in July due to strike action taken by NHS workers, doctors and teachers – ONS data shows.

Wet weather also hit the construction and retail industries, the Office for National Statistics (ONS) said, causing the economy to contract by 0.5%.

The figures were worse than analysts had predicted and continue a trend of weak economic growth in the UK.

Blame the weather and strike action for the contraction

Office for National Statistics (ONS) for UK GDP as at 13th September 2023..

Monthly real GDP is estimated to have fallen by 0.5% in July 2023, with falls in all three main sectors, following growth of 0.5% in June 2023.

GDP showed 0.2% growth in the three months to July 2023 when compared with the three months to April 2023, with growth in all three main sectors.

Services output was down 0.5% in July 2023, after growth of 0.2% in June 2023, and was the main contributor to the fall in GDP in July.

Production output fell by 0.7% in July 2023, after growth of 1.8% in June 2023.

The construction sector fell by 0.5% in July 2023, after growth of 1.6% in June 2023.

Not a recession, but the weather gets the blame for slowing up UK progress!

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India’s ‘massive expansion’ could play key role in global economic growth

India expands

Many economists stronly believe that India’s stellar economic trajectory alongside strong forecasts for some Southeast Asian countries will be important drivers for future global growth.

The next decade, could see Asia Pacific become the fastest growing region of the world economy. India, Indonesia, the Philippines and Vietnam will most likely be among the world’s fastest growing emerging markets over the next 10 years.

India’s economy grew 7.8% in the June quarter, marking the fastest pace of growth in a year.

The momentum in the Indian economy looks really strong at the moment, economists suggest. Some forecasts expect that India will surpass Japan to become the third largest economy by 2030, with the country’s GDP projected to rise from $3.5 trillion in 2022 to $7.3 trillion by 2030.

As a region, Asia-Pacific’s growth is expected to strengthen from 3.3% last year to 4.2% this year, according to economic projections.

Over the next decade, we expect that about 55% of the total increase in the world’s GDP will come from the Asia-Pacific region.

Where does this leave the U.S. and China?

Still, the U.S. will remain an important driver of the global economy, accounting for some 15% of the world’s growth over the next decade.

China will also still be pivotal in this growth story, contributing to about one-third of the total increase over the same period, analysts suggest. China’s recovery has been weaker than expected and the expected ‘growth momentum’ has wained.

China has been affected by a slew of economic data broadly missing expectations.

As a whole, analysts expect global growth to come in at 2.5% this year and next. But please bear in mind these are forecast and move regularly.

Ashoka Chakra – the Flag of India

The flag of India is a horizontal tricolour of saffron, white and green, with a navy blue wheel called the Ashoka Chakra in the centre. The flag was adopted on 22nd July 1947, after India gained independence from British rule.

It is based on the Swaraj flag, which was designed by Pingali Venkayya and modified by Mahatma Gandhi. The colours and symbols of the flag have different meanings and interpretations.

Saffron represents courage, sacrifice, Hinduism and Buddhism. White represents peace, truth, purity and other religions in India. Green represents faith, fertility, Islam and Sikhism.

The Ashoka Chakra represents the law of dharma, the cycle of life and death, and the ancient Indian emperor Ashoka who spread Buddhism across Asia.

India’s flag is also known as the Tiranga, which means ‘the tricolour’ in Hindi. The flag has a ratio of 2:3 and can only be made of khadi, a hand-spun cloth.

The flag code of India regulates the usage and display of the flag by the government and the public.

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UK debt, a perfect storm

UK Debt burden

Slow-Growing UK Faces Over £2.6 Trillion Debt Pile

£2,600,000,000,000 in debt

The amount the UK owes exceeds GDP for first time since 1961. Inflation-linked bonds mean the UK is paying more than its peers.

From the financial crisis to Russia’s invasion of Ukraine, the UK has borrowed and spent its way out of every jam. The bill for that is becoming a massive concern for the UK treasury and for the economy.

£2.6 trillion public debt

The UK’s public debt has soared by more than 40% to almost £2.6 trillion ($3.3 trillion) since the pandemic struck, leaving the country owing more than its entire annual economic output for the first time since 1961. A heavy reliance on index-linked bonds, at a time of high inflation, also means Britain will pay more to service the debt.

The high level of debt poses a risk to the UK’s credit rating, which could affect its borrowing costs and fiscal credibility. The three main credit-rating firms are due to update their assessments of the UK over the next four months in 2023, and some analysts are concerned that the UK could face a downgrade, especially after the U.S. lost its AAA status from Fitch. 

ONS data to March 2023

A downgrade could undermine Prime Minister Rishi Sunak’s effort to rebuild Britain’s fiscal reputation after his predecessor, Liz Truss, triggered a bond-market crash in 2022 by promising huge unfunded tax cuts.

Bond sell-off pressure

The pressure on the UK’s finances is also being compounded by a selloff in bonds amid aggressive rate hikes by the Bank of England to quell inflation. The yield on the 10-year benchmark this week rose above 4.70% to its highest since 2008. 

UK debt higher than UK GDP March 2023

The UK bond market is among the developed world’s worst performers this year. The rise in yields could increase the cost of servicing the debt, which is already high due to the UK’s heavy reliance on index-linked bonds that adjust with inflation.

The UK’s economic growth is forecast to remain flat through next year, which limits the scope for reducing the debt through higher revenues or lower spending. The National Health Service is stretched to breaking point and the tax burden is already at a 70-year high. The ONS warned that debt could balloon to more than three times GDP over the next half century without action.

ONS data

According to the latest data from the Office for National Statistics (ONS), the UK’s gross domestic product (GDP) grew by 0.2% in the second quarter of 2023 (April to June), following a revised growth of 0.1% in the first quarter of 2023 (January to March). This means that the UK’s GDP growth rate for the whole year of 2023 is estimated to be 0.3%, which is lower than the previous forecast of 0.5%.

ONS data to March 2023

The main factors that contributed to the weak GDP growth in the second quarter were the slowdown in consumer spending, the decline in business investment, and the negative impact of the additional bank holiday in May due to the King’s Coronation. The services sector, which accounts for about 80% of the UK’s economy, grew by only 0.1% in the second quarter, while the production sector grew by 0.7%, and the construction sector fell by 0.2%.

Uncertain outlook in uncertain times

The outlook for the UK’s economy remains uncertain, as it faces several challenges such as high inflation, rising interest rates, a slowing global economy, and the ongoing effects of Brexit and the effects of the war in Ukraine. 

ONS data for EU countries

Some economists have warned that the UK faces a ‘very real risk’ of recession due to higher interest rates, which could dampen consumer and business confidence and increase the cost of servicing the debt. 

The OECD has projected that the UK’s GDP growth will improve moderately to 1.0% in 2024, but still remain below its pre-pandemic level.

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Japan outperforms as GDP up 6% August 2023

Japan GDP up 6%

Japan’s economy beats expectations with 6% annualised growth in Q2

Japan’s economy posted its third straight quarterly expansion, latest government data showed 15th August 2023, as robust export growth contributed to an annualised 6% expansion in the second quarter, easily beating market expectations.

Economists had reportedly expected the world’s third-largest economy to produce a 3.1% growth in the April-June quarter. The GDP data translated to a more modest quarterly expansion of 1.5%, topping expectations for 0.8% growth.

The strong performance was mainly driven by a surge in exports, especially in the auto sector, as global demand recovered from the impact of the COVID-19 pandemic. Japan also benefited from an increase in inbound tourism, as travel restrictions eased and the Tokyo Olympics boosted visitor arrivals.

Outlook

However, the outlook for the Japanese economy remains uncertain, as the country faces a resurgence of COVID-19 cases and a sluggish consumer recovery. The government has extended a state of emergency in several regions, including Tokyo and Osaka, until the end of August, which could dampen domestic spending and business activity.

Quarterly expansion came in at a more modest 1.5%, versus expectations for 0.8% growth.

Optimism was tempered by muted domestic demand, given a surprise drop in private consumption expenditure despite the first employee compensation sequential increase in seven quarters.

Historically low interest rates

The Bank of Japan has maintained its ultra-easy monetary policy stance, keeping its key interest rate at -0.1% and pledging to support the economy with massive asset purchases. 

The central bank has also introduced a new lending scheme to encourage green and digital investment for the future.

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UK economy grows June 2023

UK GDP up April - June 2023

U.K. economy beat expectations with 0.2% growth in the second quarter, boosted by household consumption and manufacturing output, the Office for National Statistics said Friday.

Economists had expected U.K. GDP to level off in the second quarter, after a surprise increase of 0.1% in the first quarter, as the Bank of England’s monetary policy tightening took effect and as persistent inflation began to slow consumer demand.

The economy expanded by 0.5% in June 2023, beating a forecast of 0.2% growth. It follows monthly GDP growth of 0.1% in May and 0.2% in April. However, the strength of the June rise was partially attributed to warm weather, as well as the additional public holiday in May to celebrate the coronation of King Charles III.

Better than expected

GDP was lifted by 1.6% growth in manufacturing and 0.7% in production in the second quarter, while services grew by 0.1%.

The Office for National Statistics (ONS) noted strong growth in household and government consumption in terms of expenditure. Both faced price pressures in the quarter, though this moderated from the previous three-month period.

UK GDP up in June 2023
Growth in June 2023 was stronger than expected at 0.5%

Growth in June 2023 was stronger than expected at 0.5%, showing a recovery when the economy lost one working day due to the national holiday in May. June’s warm weather also benefited the construction industry as well as pubs and restaurants. But the economy was impacted by strike action by NHS workers, doctors, railway unions and teachers. However, the figures for the three months and June in particular were better-than-expected.

What does it mean?

Gross Domestic Product (GDP) is one of the most important tools for looking at the health of the economy, and is watched closely by the government and businesses. If the figure is increasing, that means the economy is growing and people are doing more work and getting a little bit richer, on average.

But if GDP is falling, then the economy is shrinking which can be bad news for businesses. If GDP falls for two quarters in a row, it is typically defined as a recession.

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Euro Zone GDP & Inflation Improves in July 2023

Cash

EU Inflation 5.3% July 2023

Euro zone inflation fell in July, and new growth figures showed economic activity picking up in the second quarter of this year, but economists still fear a recession.

Headline inflation in the EU was 5.3% in July, according to preliminary data released end of July 2023, lower than the 5.5% registered in June. However, it still remains substantially above the European Central Bank’s 2% target.

EU GDP

GDP growth accelerated in the second quarter, expanding by 0.3%, higher than the 0.2% expected by analysts.