Friday, August 23, 2013

Growth Figures

The latest growth figures for the second quarter of this year, released by the office of National Statistics, suggest that the UK economy grow by 0.7% in the second quarter of 2013, and activity was 1.5% higher than in the same quarter of 2012.

The revised data confirmed that all four major sectors of the economy - services, industry, agriculture and construction - had expanded during the three months to June.

The latest ONS release showed that exports played a bigger role than expected in boosting growth.

Exports rose 3.6% from the previous three months, helped by the weak pound and a bottoming-out of the eurozone economy, while imports increased 2.5%, meaning that the country's deficit would have narrowed.

"The expenditure breakdown was positive news," said Philip Rush, economist at investment bank Nomura. "Consumption obviously fairly important to the recovery there but... the recovery in the second quarter wasn't as reliant on consumption as we'd feared."

Most economists agree that for the recovery to be sustained, the UK economy needs to rebalance away from the consumer spending that helped drive the boom in the last decade, with greater reliance on industry, investment and exports.

Investment spending by businesses rose 1.7% - still a somewhat tepid rate during an economic recovery - while government spending rose 0.9%, despite spending cuts in Whitehall and demonstrating that there is still more to do to eliminate the deficit.

Chris Williamson, chief economist at data provider Markit, said: "Importantly, the upturn was not simply fueled by surging spending by households. Instead, exports and business investment were key drivers of the expansion, pointing to a rebalancing of the economy away from domestic consumption."

The Treasury, which is hoping a full-blown recovery is under way, after almost two years of weakness, seized on the widespread nature of recovery.

A spokeswoman said: "This data confirms that the British economy is moving from rescue to recovery, supported by balanced growth across the economy. It's particularly encouraging that growth in exports and investment contributed well over half of the second quarter growth rate. There is still a long way to go, but the economy is on the right track."

David Kern, of the British Chambers of Commerce, said: "Business investment is still too weak in spite of the modest rise, but the figures support our view that Britain's trading position is improving. Although the rebalancing towards net exports is taking some time, we have seen a significant narrowing of the trade deficit in the first half of this year."


Jim said...

define a pound and I will check this. a pound is nothing, its worthless, its an IOU. On every bank note it says the words "I promise to pay the bearer on demand the sum of X Pounds" what is a pound? its a simple question is it not? what is it that I supposedly can take to the boe and swap my £10 notes for?
what is £10, what is £5 you know what is £1??????

Chris Whiteside said...

A very long time ago, when our currency was backed by silver, this phrase originally meant a pound weight bar of sterling silver. That's where the expression "pound sterling" comes from.

That convertibility was suspended centuries ago, and if you take a ten pound note to the Bank of England today and try to call them on the promise, they will solemnly redeem the promise by giving you - another ten pound note or equivalent.

Money depends for it's value on confidence that it will be possible to exchange it. A lack of fiscal discipline can destroy that confidence with dire consequences.

Jim said...

sorry for late reply, been away a couple of days. Though, as you probably already know your none answer to the question is so misleading it does not really deserve a reply, though for other readers of the blog:

Chris is absolutely right about what gives money its value, it is the fact you have a degree of certainty that the commodity you are using as money is valued by almost everyone, thus you can exchange what ever you are selling, for "money" and buy using "money" that which you need.

Its easier than barter (direct swapping) Now many things over the years have passed as money, salt, cattle, Sugar, though time and again precious metals have emererged as the favoured ones. In the case of the UK Gold and Siver.

Any way the use of paper receipts became common so a receipt for a pound of silver, became known as a pound. great. The pound took hold.

Also chris is right about the pound sterling bit, though it has followed a much longer direction. on and off a silver or a gold standard, then following bretton woods, the pound (and pretty much every other currency) was backed by the US dollar, and the US dollar was backed by gold. 1971 Richard Nixon closed the gold window. meaning the US dollar was now worthless, it could not be exchanged to gold, and there was no longer clarity on what a dollar actually is, of course because all other major currency was backed by the US dollar then all other major currency's including the pound were immediately worthless too. No where currently has a currency that is worth anything a dire situation indeed, also the first time in history the entire planet had no money. (though its looking likely that china will back the yuan with gold before too long)

If you are going to trade in anything then you must be clear what it is you are trading, without a clear answer of what it is you are trading then of course your trade wont last.

Let me put it like this, you sell cars, ok then i will give you "some rice" for it. your clear first question should be "what is some rice, what type, how much rice" instead i say "oh OK then i will give you 40 amounts of "some rice". Now you would probably throw me out of your car lot at this point.

You see the only way that paper could ever be removed from commodity backing would need to be by force. You would have to force people to accept it in trade. But how to you force people to accept a receipt for nothing in trade? - simple, pass a law on what is and what is not "legal tender"

however the most blatant obvious problem with the answer Chris provided is clear, if I give you a receipt for "a zumwhacker" then you would rightfully want to know what on earth a zumwhacker is, so i tell you a zumwhacker can be exchanged for another receipt for a zumwhacker, or something of equivalent value, then you would, quite rightly want to lock me in a mental hospital.

This is why Chris still has not answered the question. What is a pound?