Tuesday, December 9, 2008

Industrial Output Falls Shaply

It is rather ironic, that officially the UK is not in a recession. (growth was 0% in Q2, fell by 0.6% in Q3). An official recession requires 2 consecutive quarters of negative growth - Q2 doesn't count since it was 0%)

Anyway, without a shadow of a doubt, Q4 will confirm what is already obvious - that the UK is in a steep recession and it could prove the worst recession since the Second World War.

Recent data from the Manufacturing sector gives more grim news. Industrial production (manufacturing and mining) fell 1.7% in October. This is a huge monthly fall and gives the biggest annual fall since 1991. Even though industrial output only accounts for 18% of total GDP. It is likely to lead to a large fall in GDP in Q4.

Graph of Manufacturing Output

Manufacturing Output: Source: ONS

What this shows:
  • Fall in the Value of the Pound has given little benefit to exporters.
  • Interest rates are likely to fall further in 2009
  • The downturn in the past few months has been much sharper than anticipated.
  • Recently producer prices fell - another indicator of weak demand and an indicator of future deflation

When will the downturn end?

Cuts in interest rates and expansionary fiscal policy will help; but there is always a time lag. Interest rate cuts can take upto 18 months to have an effect. It appears there is a powerful negative momentum in the economy creating a negative downward multiplier effect.

1 comment:

david hill said...

UK’s Shock Fall in Industrial Output – 11.2% in a single year

Britain has lost its way in the modern world in terms of its once highly coveted industrial prowess and since it was the world’s foremost technological nation that led the world some 100 years ago. What has gone so badly wrong for us? The answer is that successive British governments, from when Henry Campbell-Bannerman become the first Prime Minister of Britain and was the first to officially bear the title of 'Prime Minister' to Brown today, did and do not still understand the ‘real’ strengths of the British people. These reside as just two examples stated, in the creative and innovative thinking of our people determined by government reports by Japan (1980s) and Germany (1990s). This stated that up to 55% of the modern world that we see today was created through the thinking of our people. But the most important fact is that 75% of this leading-edge thinking came from the British lone inventors and not our universities or advanced centres of research. Therefore this country needs more than anything else, the technological catalyst and system putting in place where our innovative thinking can be released. For this is the only thing that will deliver our nation in the future from increasing poverty and continual economic decline. This need is for the establishment of the ORE-STEM system of innovative and creative development in the UK and where it is the only viable answer to our problems. Indeed it was one-hundred percent backed in 1997 by the world’s pre-eminent scientists and engineers at that time but where our government took no notice. Unfortunately both politicians and journalists in this respect are also silent about this real need for change for our nation and do the British people the most dire disservice that they ever could possibly do through this ignorance. But the greatest threat to our nation’s future survival is that their stupidity simply does not allow them to realise this.

Dr David Hill
World Innovation Foundation
Bern, Switzerland