I don't think GDP growth is important, per se. I think the growth in well-being is, and they are not the same thing.
But the government does think GDP matters and so this chart, issued by the ONS this morning, is not good news for them:
UK population is growing by about 0.34% a year right now (which is an historically low rate).
So, put the data together and GDP per head is most likely not growing at all.
So much for another of Rishi Sunak's promises.
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From the frontline where I am, we are now actually starting to cancel new projects (such as affordable housing!!) with the aim of concentrating more on the core functions only – such are our problems with retention and recruitment in my part of the public sector.
And it looks like things will become more brutal if the legislation against striking comes in.
I’ve never in my life envisaged something like this – I’ve always drank the capitalist ‘cool-aid’ that if you work hard you’ll get rewarded and you’ll be OK.
Evidently that ‘guarantee’ has not existed for some time!!
Bete noire. If people matter, everything should be expressed in terms of medians (the average person). What will be the average person’s share of GDP?
It’s am meaningless number as people get nowhere near seeing it
With food inflation admitted to be running at nearly 20% and measurements of inflation that take little account of factors such as house price inflation I think we should be very wary of Official statistics that claim to be able to accurately estimate monthly economic growth down to the nearest 0.1.
Add to the mix the power and influence of a government with a notable reputation for dishonesty and coercing public sector workers and it is hard to know what to think.
If we do get an Anti-Tory government after the next election they would do well to start of with a modern version of the Domesday book to find out who owns what, how this country is actually being run and the real Social and Economic state of play.
If they do not do that they are going to waste vast amounts of money on the wrong problems and the wrong solutions.
But where is the recession you have been promising us?
For heaven’s sake, look all around you
You are fiddling around with 0.1% measurements (the statistical error is larger for data measurements as unstable and unreliable as this, and subject to change constantly when re-measured). If you are relying on flat-lining over four years as a case for the Government; you have simply lost the plot. Please tell me you meant it as a joke?
Look at the international trends and comparators if you want to see what is happening. Britain is finally reverting to offshore, antiquated irrelevance; economically simply now being left behind in the dust of history. The British people, saturated in the misconceptions of Thatcherite neoliberalism for forty years, suddenly looked out at a world they couldn’t understand or cope with and keep their illusions; and opted out in 2016. They thought it bought them ‘independence’. It bought them only the self-indulgence of irrelevance, and the guarantee of economic decline sharper, more acute than ever before. It was a gross error; and frankly, the world doesn’t care.
India has just moved past our GDP. Economics in the rea, 21st century world operates in Big Battalians, or leaves room for small, nimble niche players living in the margins of a Big Battalian. Britain is neither Big, nor niche; it is just an anachronism, adrift, out of its depth, with neither engine or rudder. Flatlining as the preliminary to momentous decline of its position in the world. Good luck with that.
May I return to the instituion that appears to have been given the job of actually running the British economy; the Bank of England (BoE)?
The British economy has stalled, and totters on the edge of recession. The economy grew by 0.1% in the three months to March (effectively it has stalled). In March itself, it fell 0.3% (ONS). Falls in Services, Distribution and Retail performace were factors. Inflation remains stubbornly high and is not responding to the measures being taken. Comparatively, the principal quarterly GDP measure is 0.5% below Q1, 2019. We have not even recovered to pre-covid levels, where household spending is still 2.3% below 2019 (Pantheon Macro). Furthermore, on international comparisons (Britain and the G7): “The UK remains the only G7 country in which the main quarterly measure of GDP has not recovered to its pre-COVID peak yet; it still was 0.5% below its Q4 2019 level in Q1” (Pantheon Macro Chief Economist). All this, taken together is serious. Meanwhile, Government and BoE forecasts are poor; and their policies are both working ineffectively and imply poor understanding of the underlying problems.
The BoE explanation of inflation and the solution it offers are frankly irreconcilable. The mechanism of interest rates it uses to achieve its aims has been described as a “blunt instrument”; but it is worse, it is an ineffective instrument; it implies that the BoE do not understand the nature of the problem, do not have the tools to fix it, and is frankly the wrong institution to be tackling the problem.
The Governor of the BoE acknowledges the biggest problems are in food and energy costs. These are the essentials of life; they are not the issues of overheating discretionary spend that may be addressed by crude measures, without imminent, serious effects on life. Andrew Bailey claims he understands the impact of rising food prices and energy costs hit hardest those least able to pay; but faced with rising costs of food and energy, and without pay rises that go some way to offset some of effect, the impact is devastating. The impact is not only directly on living standards, but especially (although not exclusively) in the public sector because the Government can leverage direct pressure on wage demands (a BoE, goverment axis/double whammy), and the effects are seen not just in declining living standards, but real damaging effects to the performance and output of these sectors; demonstrated in the inability of whole private and public sectors to find or retain staff for the remuneration being offered. This is both grotesque and idiotic. The BoE blunt instrumentclearly damages economic performance. In the background lurks the elephant in the room the BoE cannot even mention, and must pretend is not there: the enduring, insidious and endless damage to the economy of Brexit, that is compounded by interest rate increases. We are going round in insidiously self-destructive circles.
Even worse, rising interest rates have no bearing on rising food prices, or energy costs. The causes of both energy and food price inflation is completely out of the control or hands of the BoE; the Governor has no influence over either food or energy inflation, whatever he chooses to do. He is a mere, redundant bystander. He and his Bank are, materially and substantively irrelevant. All he can do is increase the suffering of people faced with serious cost of living problems caused by food and energy price rises, and protest that they are not suffering quietly enough, or accepting their fate without resisting, with insufficient stoicism. They should not attmept to alleviate their suffering. You only need to state the case to observe the utter absurdity of the BoE position. It would be bad enough if the BoE was the Government: it is just a Bank.
The BoE would only have any case at all, if the Bank actually had some leverage over food or energy inflation. Let us therefore look at food inflation, as an example of the absurdity of the BoE argument. The Food Foundation, a reputable and independent body, set out the issues currently affecting food price inflation. It has lprovided its food prices tracker, April 2023, showing food inflation at +19.1% overall. Examining specific items, from cucumbers, through eggs to sunflower oil and tomatoes, it provides explanations of why these commodities prices are rising. The Food Foundation explains the price rises accounted for by the following illustrative factors; the war in Ukraine, labour shortages in British farming, climate (supply affected by cold weather and floods in Spain and Morocco); energy prices impacting on UK greenhouses, or fertiliser costs in British agriculture; global avian flu epidemic on poultry and egg production. And so it goes on. These are the causes. Wage demands are not given, save where there are labour shortages; but there in the UK there are amny critical factors we may offer; not least Brexit, Covid and the post-covid structural changes in British employment trends. Interest rates answer none of them.
The BoE solution to all these calamities of war, of international supply, of climate catastrophe, of labour shortages (exacerbated by Brexit) and viral epidemics; is to raise interest rates twelve times in a matter of months. All that does is inflict severe punishment on the person obliged to buy food; that is everybody, indiscriminately, whether they can pay or not.
There is an old acerbic question in Scotland given bluntly to address the problem of somebody talking arrant nonsense. ‘What has this got to do with the price of mince?’ The answer the BoE has given on the matter of food inflation is clear: absolutely nothing.
Agreed
Thanks
Exactly. If you ask the Bank of England how this is meant to work, they’ll tell you that there has been a reduction in supply (whether that is caused by Covid, or Ukraine, or Brexit, or other factors) and we need to cut demand to match. To put it another way, they actually want to harm the economy – to make most people poorer – in the short term because they hope it will be better in the long run – for some, of course: an upsides won’t be evenly distributed, and any winners tomorrow won’t be same ones losing today.
And the economy is a complicated non-linear system with long delays between nudging the interest rate lever up or down, so we have little to no idea what impact a rate change might have or when. I suspect the BoE has gone to far already and they won’t realise until 6 to 12 months time.
By when they will have broken the economic back of millions
Good summary. Andrew Bailey is either malign, stupid or merely a ventriloquist’s dummy for other interests. The country is run by a criminal gang who are trashing it. Thatcher started the process but I believe she thought she was doing good, this lot are in it just for themselves and their mates. I thought Brexit a mistake in 2016, I never thought every effort would be made to make it into a disaster.
An interesting graph to produce is GDP vs Gini coefficient, when I drew it (sorry I don’t have a copy) I noticed that GDP is almost inversely proportional to Gini. So as GDP rises so does inequality. Funny that.
Richard, you say “I don’t think GDP growth is important, per se. I think the growth in well-being is, and they are not the same thing”. Abd that is so right. Economic growth is a god worshipped by all the political parties, except arguably the Greens. But continued economic growth in Britain and throughout all the developed orld is surely the assurance of future climatic and environmental catastrophe for humanity. Producing more motor cars – even electricallly powered ones – can only mean more carbon pumped into the atmosphere and more methane leakage from oil and gas wells and from the permafrost and the submarine clathrates. More aircraft to fly ever increasing numbers of westrners and Japanese and Chinese Australians to distant exotic destinations can only mean yet more carbon from the jets propelling them through the air. More second homes or weekend cottages must mean greater demand for heating and greater use of vehicles to get from the overcrowded cities to theose rural idylls again means ever more carbon burning. more electric motor vehicles means ever more lithium and rare earth metals being plundered from vast mines gouged out of the planett’s surface by often exploited men women and children little better than slaves. The more people who eat asparagus imported from Peru and courgettes from Kenya and palm oil based soaps means more impact on local ecosystms and wildlife. Surely,instead of planning for ever more economic growth based on ever greater levels of consumption of luxury goods and services, we should be looking to how we can change, not grow, the economy and our way of satisfying our basic needs for housing, warmth, sustenance and food, and good health. This means perhaps, fewer holidays in distant lands, diets based on food produced locally, housing designed to preserve heat in winter and be cool without ir conditioning in sultry summers, local provision of goods and services, more and better local public transport, fewer cars, fewer HGVs travelling across continents to bring us food and clothing, perhaps the15 minute city so hated by the Fascist right. Economic and social restructuring and change, not economic growth, is essential for the future of humankind and our planet.
If GDP per-head includes pay reviews / pay rises, I suspect my own case is not unique:
April 2022: 0.25% increase;
April 2023: Increase (and therefore the discussion of) put back until July 2023 (at the earliest.
I suspect gdp per head is falling
Quoting totals is deeply misleading
Responding to Mr Warren’s post on the BoE, it is just as bad in the Euro zone, here is an imbecile called Knot (head of the Dutch central bank):
https://www.marketscreener.com/news/latest/ECB-s-Knot-says-rate-hikes-are-working-more-needed–43770136/
EU has similarish problems to UK (and if we treat the member states as county councils – then the funding model is identical – taxes or bonds are the ONLY way for member states to raise money). Anyway Imbecile-Knot thinks raising interest rates will cut inflation (caused by energy costs driven by oil & gas price rises). Thus we have Knot and his religious approach laid bare for all to see and given he is extremely well paid, his daft interest rate rises have no impact on him or his family or indeed those in the upper reaches of the banking hierachy – so that’s alright then.