Good news for the UK economy and GDP

Today we embark on a raft of UK economic data but before we even reach it the Financial Times has returned to the most familiar theme in UK economic life.

There is a very cool-looking apartment on sale across the street from Harrods in London. It has three bedrooms, beautiful high ceilings, striking contemporary art on the walls (not included in the sale) and a roomy kitchen done out in glossy white wood and chrome. It is not cheap at £7.25m, but it is an awful lot cheaper than it was last year.

The flat was first listed on March 1 2016 for £8.25m. In July, about three weeks after the EU referendum, its price was cut; then it was cut again in December. Today it is available for about 12 per cent — or a full £1m — less than the original asking price.

Actually that looks like a PR puff piece or indeed advertising dressed up as journalism. But we do move onto an area where the FT has caught up with us in here which is the fact that house prices have been seeing falls in central London.

A quick glance at the property website Zoopla reveals that reductions of 15 to 20 per cent for London homes priced above £1m are not uncommon. According to its research department, more than a third of homes on sale in Kensington and Chelsea have had their asking prices reduced by an average of 7.97 per cent.

The FT typically tries to blame Brexit but then finds someone who thinks it has provided a boost! That comes from this.

After the result was announced, and the pound fell to its lowest level against the dollar for 31 years, the spending power of those buyers with dollars in their pockets escalated wildly. Up about 11 per cent on the currency play alone.

Which means overall we see this.

However, once you factor in the decline in London house prices over the intervening six months, you are looking at some serious markdowns indeed. Knight Frank calculates an effective dollar discount of 22 per cent, between December 2015 and December 2016.

So there you have it the message from the Financial Times is to sing along with the band Middle of the Road about central London property.

Ooh-We, Chirpy, Chirpy, Cheep, Cheep
Chirpy, Chirpy, Cheep, Cheep, Chirp
Let’s go now

If we move on from what in some cases is the equivalent of specific property pimping there are issues here. One is simply the price as we mull if even if a one bedroom property is in Covent Garden it can be considered cheap. Also we need to compare the recent falls which estate agents emphasis with the previous rises which they do not. Next comes the issue that the flipside of a lower £ is that existing owners have lost money in their own currency. Also looking forwards the real issue for many is what you expect the UK Pound £ to do next as the future of course matters much more than the past in that regard.
There is much for me to mull on my next cycle ride into the City as once I pass Battersea Dogs Home then here I am.

Some units at Nine Elms, a new residential development in Battersea, are being marketed at about £1,300 per sq ft, after already being given sizeable reductions, according to Zoopla. For £1,300 per sq ft, you could buy a historic apartment overlooking the Duomo in Florence, or a glossy new-build apartment in Miami Beach.

Is that cheaply expensive or expensively cheap?

Boom Boom UK

It is nice to end the week with some really good news for the UK economy so let us get straight to it.

In December 2016, total production was estimated to have increased by 1.1% compared with November 2016; the only contribution to the increase came from manufacturing……manufacturing provided all the growth, increasing by 2.1%.

So an upwards push to production from manufacturing which did this.

The increase in total production was due to broad-based increases in manufacturing. Pharmaceuticals (which can be highly erratic) provided the largest contribution to the growth, increasing by 8.3%. Other large contributions to the increase came from basic metals and other manufacturing and repair not elsewhere classified, which increased by 4.5% and 3.7% respectively.

So in an, if I may put it this way Trumpton era we find that we are en vogue by boosting manufacturing? We need to dig a little deeper though as pharmaceuticals have had a good 2016 but via a volatile path.

in December 2016 compared with December 2015, total production output increased by 4.3%. All main sectors increased, with the largest contribution provided by manufacturing

They seem a little shy of telling us that manufacturing rose by 4% so let me help out. That was driven by pharmaceuticals being up by 19.1% which illustrates their volatility. This left us with positive numbers for 2016 for both production (1.2%) and manufacturing (0.7%).

If we continue with the good news theme then we have some hope of a further upwards revision to UK GDP for last year. This is the reply I received from our statisticians in what was an excellent service.

IOP and Construction combined have an impact of 0.04%. This is nearly all from IOP. ( @StatsKate )

For newer readers I have little or no faith in the official construction numbers which in the words of Taylor Swift have seen “trouble, trouble,trouble” but for completeness here they are.

Compared with December 2015, construction output increased by 0.6%, the main contribution to this growth came from new housing work.


Even these had a good news tinge to them this morning.

The UK’s deficit on trade in goods and services was £3.3 billion in December 2016, a narrowing of £0.3 billion, which is contributing to the narrowing in Quarter 4 2016.

So let us look further.

The UK trade deficit on goods and services narrowed to £8.6 billion in Quarter 4 (Oct to Dec) 2016, following a sharp widening of the deficit in Quarter 3 (July to Sept) 2016; this narrowing was predominantly due to an increase in exports of goods to non-EU countries.

Have UK industry and businesses got the new post EU leave vote vibe? I think that it is too pat a conclusion but we did see this.

there was a much higher quarter-on-quarter growth in exports to non-EU countries in Quarter 4 2016, following a fall in Quarter 3…….Exports of goods to non-EU countries rose by 17.3% to £43.8 billion between Quarter 3 2016 and Quarter 4 2016.

So some of it was a simple rebound.


Today has seen some rather good news for the UK economy as in spite of a drag from the continuing maintenance of the Buzzard oil field production was pushed higher by strong manufacturing data driven by the pharmaceutical industry. Added to this construction at least did not fall and on a quarterly basis the trade figures were better. So there is upwards pressure on the preliminary GDP report although we cannot say exactly how much yet.

There are two main clouds in our silver lining. These are simply  that we have yet another trade deficit in an extremely long series and some perspective on production.

Since then, both production and manufacturing output have steadily risen but remain well below their level reached in the pre-downturn gross domestic product (GDP) peak in Quarter 1 (Jan to Mar) 2008 by 7.6% and 4.2% respectively.

A Bank of England for the 0.0000000000000000000001%

Yesterday saw the announcement that Charlotte Hogg was to be promoted to Deputy Governor and it raised this issue.

Dear Mark Carney does promoting a daughter of a Viscount and a Baroness come under the Bank of England Diversity banner?

It certainly comes under the minority banner as I am no expect on Debretts but do wonder if she is in to coin a phrase, a class of one? Oh and it appears that Kristin Forbes is singing along to “We gotta get out of this place” by Blue Oyster Cult.

So if you hint at an interest-rate rise your current lifespan at the Bank of England appears to be 48 hours!


18 thoughts on “Good news for the UK economy and GDP

  1. Interesting comment about the FT. I read it for the first time in ages yesterday and was frankly shocked at how poor it has become. It seems to have caught a very strong dose of post-Brexit depression, which colours everything written.
    I think that you will find that diversity at somewhere like the BoE means someone who ticks some sort of box (on this occasion, being a woman) but in all other respects will fit in nicely to the rather agreeable club. Perhaps your lexicon could add a definition of Diversity as being “people like us”…

    • Never read it any more either James.It appears to be a mouthpiece for the governing elite these days rather than actually analysing the situation in a robust,unbiased manner.

      It’s coverage post/pre Brexit has been poor.

  2. Shaun,
    Is UK oil production viable at current $ prices?
    The reason I ask is there seems to be a move to trade oil for gold certainly in the case of Russian oil to China who are willing to convert yuan to gold shipments.
    As an aside I note Germany is ahead in its plans to repatriate gold reserves from USA and France back to Frankfurt but leaving some in London for now?

    • Hi Chris

      The German gold issue is a fascinating one isn’t it? I mean for Euro area solidarity you could understand gold being repatriated from the UK and US but instead it is the US and France. According to Reuters this will be the end game.

      “Once the relocation is completed, the Bundesbank will keep 1,236 tonnes in New York, 432 tonnes in London and the rest in Frankfurt. The current move involves 300 tonnes from New York and 374 tonnes from Paris.”

      Not quite Pop Muzak which had “New York, London ,Paris, Munich”

      Oil and Gas UK tells us this about the North Sea

      “Sector-wide action has pushed unit operating costs down by a third from an average of $29.30/barrel of oil equivalent (boe) in 2014 to $20.95/boe in 2015, aided by a 10 per cent rise in oil and gas production – the first in 15 years. Costs are expected to fall by a further 20 per cent this year to around $17/boe, representing a 42 per cent improvement in just two years.”

  3. In terms of cashflows,there have been improvements for teh UK but the balance sheet position remains awful.

    I mean how much of GDP is sponsored by Motability?Imputed rents?

    Measured against private and govt debt,our performance doesn’t bode well for the next generation.

    Shaun,just a quickie.I read this on my laptop normally and have been struggling to leave comments for months.Any ideas why that might occur? I am a complete technophobe.

    • Problems with comments (or any other web content) are usually specific to the browser you’re using rather than the operating system or hardware platform. So try downloading another browser (i find very little Firefox wont handle well) and see if works with that. If you have two different browsers available you’ll generally be fine. It may be possible to solve the issue in the current browser by making sure you’re using the latest version of it. Also try googling the problem and see if there’s any advice on playing with the browser settings that might fix it.

  4. The press is so partisan it’s very hard to get any perspectives on the real UK situation and effects of the leave vote. So I find myself paying more attention to the stats that you so diligently report – slippery beasts that they are. UK appears to be doing pretty well – latest new car sales, growth, employment etc – and my overall sense is that:
    1 – the MSM should stop the facile yelping at Trump and Brexit as the bogeymen and address the globalization drift that has debased salaries, unions and living standards.
    2 – some of the froth is gone (London HPI, all to the good) but the steady-Eddy Brits are getting on with it, albeit with frozen/shrinking salaries.
    3 – we’re at the vanguard of EU reform with our Brexit cliff-jumping, we might as well try to be positive about it. And Tim Farron/Owen Smith et al should start exercising their democratic rights by forming a new party to campaign to rejoin the EU project!

    • Re #1 whilst salaries and Unions have no doubt been debased partially as a result of globalisation living standards have not. I was having a clearout and came across an old receipt for a 21″ colour telly I bought in 1981 – £300!! Ouch!! Now I can get the same quality telly for £250 but my salary is 3.5 times greater. Clothes and cars have been falling in price due to globalisation as all these things are made abroad (OK BMW and Honda do assembly of pre-manufactured and imported car parts in the UK), Likewise double glazing has collapsed in price and one other thing, most things I used to buy when made in the UK to misquote Steve Jobs just didn’t work! Now they do! Give me globalisation every day.

      Are these things made in sweatshops? Maybe by our standards, but I don’t think foreign workers would thank us for imposing much better working conditions on them resulting in loss of employment for many of them as we struggle to afford the higher priced goods they produce as a result of those better working terms and conditions when they are very happy with their pay and conditions compared to what they had 30 years ago. Globalisation has lifted many out of poverty although they still don’t have any where near as nice a lifestyle as we do.

      • I guess consumer electrics have massively softened the blow of housing changes – I’d like to see a bus driver/teacher buy a 3 bed semi on one salary in my town, which was pretty standard when I was a nipper – and food prices are so low it doesn’t crush our disposal income as much as it could (those Lithuanians picking spuds for seven quid an hour could be helping there) but living standards anxiety seems to be weighing on the minds of voters, outside the South East anyway. I’m thinking more of the semi-skilled/starting out kid working in a pharmacy or surveyor’s office and they see a higher skilled EU kid who will do the same work for less money. Part of me thinks it’s nuts to try to resist this and the benefits of migrant integration far outweighs the costs, just need to be more imaginative/game, but I don’t see anyone from the political class making that argument effectively. Large scale manufacturing in this country must be doomed, so is it Age of Leisure universal income time with people volunteering to work in their communities/to earn extra if inclined (I wish) or finding some new model of work for the manufacturing heartland communities that got passed over in the 80s/90s?

        • to mis-quote Bill Clinton’s successful slogan, “It’s the house prices, stupid”. Massively overpriced houses and rents are transferring huge wealth from poor to rich, from young to old.

          The excessive housing costs also kneecap UK businesses. Now there are many developed, educated countries which are capable of large scale manufacture. They compete on wages. The UK’s competitors have a huge advantage from the fact that overpriced UK housing makes Britons poor on a wage that makes foreign workers comfortable.

        • “I’d like to see a bus driver/teacher buy a 3 bed semi on one salary in my town, which was pretty standard when I was a nipper” – bus driver, no never in my town even 36 years ago, teacher yes then and now although the teacher would have to borrow 4 times her/his salary now as opposed to 2.5 – 3 times salary 36 years ago, but then again the 3 bed semi 36 years wouldn’t have central heating, upvc double glazing or cavity wall insulation which is standard nowadays. Oh and mortgage rate was circa 13% back then as compared to circa 4% now so the purchase price of a house would have to cost three times more now in real terms as compared to 36 years ago to equate to the same monthly payment.

          I agree that there is anxiety around living standards but I’m not sure it is well founded, I certainly do not want to return to the bad old days.

          Your point about starting out kids is well made but I guess Brexit will take care of that with closed borders leading to the inevitable inflation and a guarantee of falling living standards.

          I argued back in the early 90’s when politicians said the UK needed to emulate the so called “Tiger economies” and take them on at their own game that the UK cost base was too high relatively and they were floggin a dead ‘orse.

          The way forward was to concentrate on design and manufacture of plant and machinery selling it to Emerging markets to produce goods with. This would have bought 20 – 30 years for the UK so that by now, as Emerging Markets began making their own capital equipment, having upgraded their education system we would now be left with design only of both capital equipment and the actual goods which of course would be taken over by Emerging Markets in another 20 years at which point I would be out of ideas.

          I was not listened to and we are where we are – a slow decline with mostly unskilled service sector jobs and some semi skilled and skilled construction etc alongside niche high tech engineering that the UK excels at (Formula 1 cars, aircraft and bicycles – yes I’m serious about bicycles). The decline would be slow whilst immigrants are allowed in to suppress wage levels making things generally more affordable to everyone on declining salaries. Brexit will make for a fast decline with spiralling wage driven inflation with wages never pacing inflation even so, this making things less affordable for people and I personally shudder at the idea of mass produced items bearing “made in the UK” on them as my heart would go into my mouth each time I tried to use a new purchase to see if it actually works. Welcome back to the bad old days, £1200 telly’s and the population sliding back into renting washing machines and telly’s etc as they used to in the 50’s and 60’s..

  5. Although BÖC did do a great cover of “We gotta get out of this place” on their classic live album “Some Enchanted Evening”, I feel duty-bound to point out that the track was actually first recorded by Newcastle-upon-Tyne’s The Animals

    • Hi TW

      Yes you have got it right as I recall discussing Some Enchanted Evening with my school friends back in the day. Ah “Don’t Fear The Reaper” etc….:)

      BBC4 had The Animals performing it on one of their recent documentaries so I knew that but some how for me it is always B.O.C so I am guilty as charged.

  6. Hi Shaun,

    Charlotte Hogg does indeed represent a change of attitude at the B of E with a move away from automatic placements for Goldman Sachs alumni.

    Ms Hogg, of course, has McKinsey and Morgan Stanley as the highlights of her CV so no problems there!

    • Hi Jim M

      That was very prescient of the Viscount and Baroness to encourage their daughter to avoid Goldman Sachs. On that subject social media nearly went into meltdown yesterday over a Goldman Sachs hedge fund going from London to New York. But when I read the article and it mentioned 8 traders I thought that if every job change/loss was covered like that, well!

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