UK Accelerating Economic Boom, GDP 1.9% 2013, 4% 2014? Conservative Election Win?
Economics / UK Economy Jan 29, 2014 - 04:26 AM GMTBy: Nadeem_Walayat
The latest ONS UK GDP data showed strong growth for Q4 that lifted annual GDP for 2013 to 1.9%, the fastest growth rate since 2007, and up from the 0.3% of 2012 and that many economists had convinced themselves that the UK was heading for a triple dip recession during 2013.
The UK economy risks suffering from a triple-dip recession amid a period of persistently low growth that will last until the next election, the governor of the Bank of England Mervyn King warned - Nov 2012.
Still despite the positive economic data, academic economists could be find right across the mainstream media focusing on the fact that more workers are working for less pay which is resulting in stagnating GDP per capita, this whilst missing the real big picture as revealed by Britain's latest unemployment data that far fewer workers were let go than during past recessions which has puzzled many journalists such as the BBC's former all things economics Stephanie Flanders, missing the obvious that firms having retained workers at lower productivity therefore have productive capacity primed to easily ramp up production without having to incur costs such as recruitment, higher wages and training, which as I expect will act as huge accelerant for the economy during 2014 and into the May 2015 general election.
Newsnight - 28th Jan 2014
Stephanie Flanders - "Productivity, that puzzle, people worrying about why workers are not making more and why we are not able to make more per head is actually the flip side of living standards issue, because you can only pay workers more when they are making more"
Jeremy Paxman - "I asked Danny Alexander about this and he did not seem to know what the answer was either"
Stephanie Flanders - "No one does, officially we don't know"
The answer is productive capacity - Something the academic economists will only realise AFTER the FACT, well over a year from now, after the next election, after the Conservatives have won and so with the benefit of much hindsight they will be writing reams of worthless text explaining why the economic boom happened and that it was because of firms having a high degree of spare worker productive capacity that allowed firms to expand with little extra increase in costs as compared to past recoveries so that the expansion was not linear but exponential in terms of productivity gains.
UK GDP Forecast 2014
My long standing forecast as of Dec 2009 as illustrated in the Inflation Megatrend ebook (FREE DOWNLOAD), 31 Dec 2009 - UK Economy GDP Growth Forecast 2010 and 2011, The Stealth Election Boom ) and the update following the June Emergency Budget revising 2011 to +1.3% (09 Aug 2010 - UK Economy GDP Growth Forecast 2010 to 2015) was for the UK economy to grow by 1.4% for 2013 and 3.1% for 2014.
- UK GDP 2010 2.8%
- UK GDP 2011 = 1.3%
- UK GDP 2012 = 1.1%
- UK GDP 2013 = 1.4%
- UK GDP 2014 = 3.1%
- UK GDP Mid 2015 = 3.3%
My updated analysis of December 2013 resulted in the following forecast conclusion :
30 Dec 2013 - UK House Prices Forecast 2014 to 2018, The Debt Fuelled Election Boom
Therefore in terms of my economic growth conclusion, I expect the UK economy to at least attain a growth rate of 3.6% for 2014 and target 3.8% for Q1 2015 with a strong possibility of achieving the holy grail for election victories of announcing during the election campaign of 2015 that the UK economy at that time was growing at 4% per annum. Furthermore post election I expect that an over heating UK economy to slow as it dips back towards 3% over subsequent quarters of 2015.
Meanwhile academics will be busy once more revising their forecasts for 2014 as they ramp up expectations from a range of 2% to 2.5% to now a range of 2.5% to 3.2%, which will still significantly under estimate the actual rate that could even reach as high as 4%, a defacto election boom!
Another thing that 99% of economists and thus journalists that regurgitate their views miss is the prospects for interest rates which will likely end 2014 far higher than anyone (apart from me) can imagine today as most such as Stephanie Flanders remain convinced they will stay put at 0.5%.
"I think its going to be really helpful for the Bank of England if it continues and people are expecting inflation to maybe be under 2% more than above it over the next year or so, that will be a huge benefit to them because the Bank of England does want to keep interest rates low and get more people back to work and crucially get productivity and growth back" - Stephanie Flanders - 15th Jan 2014
19 Aug 2013 - UK House Prices Bull Market Soaring Momentum, 10% Inflation by October?
Interest Rates to Rise Sooner than Anyone Expects?
Therefore forget about 0.5% UK interest rates in 3 years time, far more probable is 4.5% interest rates by the end of NEXT year!
Revisiting Academic Forecasts for 2013
Here is a re-cap of what the academic institutions expectations were for 2013 just prior to the start of the year in order of inaccuracy.
Nov 2012 - OECD 0.9% and 1.6% in 2014.
Nov 2012 - EU : 0.9%
Nov 2012 - Bank of England : 1% - Stephanie Flanders again commented "The Bank hasn't just lowered its growth forecasts for the next year or so - it has more or less given up hope of being pleasantly surprised."
Nov 2012 - British Chambers of Commerce : 1.2%
Nov 2012 - CBI: 1.2%
Nov 2012 - NIESR 1.3%
Actual 1.9%
UK General Election Forecast
The latest GDP data is in line with my expectations for an election boom that looks set to deliver the Conservatives an outright election victory in May 2015 as concluded by my earlier in-depth analysis:
30 Dec 2013 - UK House Prices Forecast 2014 to 2018, Inflation, Trend Trajectory and General Election 2015
In conclusion a May 2015 general election at an average house price inflation rate of 8.5% would result in a Conservative overall majority of at least 30 seats. Therefore this is my minimum expectation as I expect UK house prices to start to average 10% per annum from early 2014 with my actual forecast converging towards average UK house prices breaking to a new all time high just prior to the May 2015 general election which would be a significant boost for housing market sentiment and thus the Conservative's election prospects.
Ensure you remained subscribed to my always free newsletter for housing market updates as well as FREE download access to my new UK Housing Market ebook (available by mid February 2014) which includes the full analysis and many topics beyond the forecast analysis such as -
- A step by step guide of how to buy a house.
- Analysis of buying vs renting
- How to increase the value of your home
- Managing your mortgage debt
- Maintenance that can save you a lot of money long-term
- Money saving low cost home improvements
- Regional house prices analysis
- Surveying properties - what to look for
and much more.
Source and Comments: http://www.marketoracle.co.uk/Article44173.html
Nadeem Walayat
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Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
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