The economic patient is stirring

If you glance at the breakdown for growth forecasts for the UK this year you will see what an economic system looks like as it starts to climb back out of recession.

If we achieve 1.5% GDP growth this year, it will have been driven mainly by public sector growth - likely to be around 1.7% - with a small contribution by private sector spending - around 0.7% - and some offsetting reductions in investment: investment spending has collapsed over the last two years and appears to be declining at a rate of 2.4% this year.   Oddly, while exports are expected to grow pretty well this year on the back of a more competitive exchange rate (forecasts suggest an expansion of some 4.5%), these are likely to be matched by higher imports so that there is only a very small net contribution to growth from trade.

The most recent estimated figures for UK GDP growth in Q1 make two issues clear.  Firstly, to use the

When governments and the market fails....

The  volcanic ash crisis is unfolding in a fascinating way with business leaders starting to look for someone to blame - and in this case it's 'the government' or even 'governments' of the EU that are to be blamed for not realising how bad the situation was becoming over the weekend.

I was one of those potentially stranded souls without a way to get home - from the Netherlands to the UK.  In the first case I had to change plans at the last minute on Thursday to ensure I could get to a business seminar in Maastricht.  Then as the situation escalated it was a matter of wondering how to get back.

The market system responded quite well to the occasion.  Eurostar found extra capacity it could lay on and its pricing model pushed ticket prices up.  Other alternative travel routes have followed suit.  The telecomms

Commercial Priorities for the Year Ahead

The prospects for growth in the UK over coming year and beyond are becoming clear. The final revisions to Q4 data for the US and UK tell a story that both these economies grew more rapidly in the Christmas quarter than had been thought at first. It is likely that we are out of recession but still in a depressed state when you look at activity levels compared with three years ago. Opinion is somewhat divided over the pace of recovery in 2010 – indeed whether we will slip back into recession in the West if a perfect storm of poor policy plus lack of confidence in ‘the markets’ and in the real economy fails to ignite growth.

We can learn a lot about the potential unfolding of this recession by reflecting on our previous experiences. The National Institute of Social and Economic Research (NIESR) produces a time-line for the UK recession compared with the four main recessions experienced in recent times: in 1930-34, 1973-76, 1979-83 and 1990-93. If you look at the progress of the recession in months since the peak of the cycle and the level of activity in relation to that peak, you see some very clear patterns.

Letters From Economists

The problem at the heart of the argument between the economists that have recently published open letters in the Times and FT is that we all want a level of certainty that is simply not possible. The debate and conclusions that the different groups draw are based partly on what they look at when they assess the strength of the economy and partly on their judgements about what that means.

UK Economy Still Not Growing in Real Terms

Latest figures published today for the UK by the Office for National Statistics, show a decline in GDP for Q3 of 0.3%. This is an upward revision on the first estimate of a month ago, but not enough to take the UK out of a technical recession. At current prices and with a small amount of inflation in the system, GDP grew by 0.1%.

Looking more deeply into the results, we see strong variations in activity.

Latest IMF forecasts revise GDP growth upwards for 2010

Today's IMF Economic Outlook provides some positive news for the global economy. Below is a short overview from Jorgen Elmeskov, Acting Chief Economist at the OECD.



Higher growth than previously expected for next year, but for some the legacy of high unemployment will provide a drag on the speed of the recovery. Is that a hint of a wry smile when he seems to suggest that the US, having shed labour rapidly, will bounce back more quickly than labour hoarding EU companies and countries?

Overall the OECD economies are set to grow over the year, with the exception of Greece who will face a small decline in 2010, and the non OECD world is set to bounce back more rapidly.

Unemployment in the EU is set to hit double digit figures exceeding 10% for the next two years. Eight countries are set to stay above 10% with Spain (19.3%), Turkey (15.2%) and Ireland (14%) likely to struggle for some time yet in returning to strong expansion.

A summary of the forecasts is provided on the OECD website with detailed assessments of individual countries too.

Boston Consulting Group (BCG) Value Creators Report 2009

I have just been reading the latest BCG report published last month on the value creation of companies and industries over the year:  www.bcg.com/documents/file31738.pdf

A must read for everyone in positions of responsibilty in business


The report is of real interest as it not only looks at performance over the last year and 5 years, but also at 'sustainable' value creation over the last decade.  In part this is the reaction against the cries of 'short termism' against what appears to be a US influenced obsession about stock price performance.  Of real note is the pervasive presence of businesses from South Korea, Japan, India and Brazil.  Of the top 10 global industries over the last 5 years to 2008 these countries account for 6 of the places.  And that is sustained even if we strip out the crash that had already destroyed stock values in the last year of the analysis.

US companies dominate the tables of value creators over the decade as a whole, but we have to wonder....