The official government figure shows UK economic output has fallen for two-consecutive-quarters.
It was widely anticipated that UK is gone into a recession in the second half of 2008, but figures are worse than expected. The UK economy shrank by 1.5% in the last quarter of 2008 after falling by 0.6% in the third quarter.
Source: BBC
The unemployment has reached 1.91 million in November 2008, the highest level since September 1997. Since then, many more thousands of jobs have been lost. It looks like, everything done by Labour government since 1997 is being undone in the last year or two after Gordon Brown's claimed "golden age".
The industrial output is awful, it shrank by 4.6%, the biggest contributor. But as seen from the graph below, it is not as bad as other big economies.
Source: The Economist, January 17th-23rd, 2009
Well known investor, co-founder of Quantum Fund, Jim Rogers basically said "The UK is finished" after the government's plan for second-bail-out for the banks anncounced on Monday. “I would urge you to sell any sterling you might have. It’s finished. I hate to say it, but I would not put any money in the UK” is what he said. The bail-out of the banks are making the public debt to new high-levels.
Dr Andrew Lilico, the Managing Director of Europe Economics, predicts the recovery would not come until 2011. He sees a possible growth for a single quarter in 2010, as a consequence of all the monetary and fiscal measures taken in the last 3 months as it takes 18 months for those policies to have a full impact on the economy. But he doesn't see a full-year-recovery anytime before 2011.
The economic situation is certainly worse than many people expected and it seems it is going to be a long recession. The UK and the USA are worst hit amongst the industrialised economies. In my opinion, the economic growth seen in the last decade was largely due to consumption-boom, which is unsustainable. These consumption-boom was made available thanks to the cheap-credit, largely coming from Asian economies, such as Japan and China.
It is true that, those who were financially prudent are being hurt as well, for instance Germany and South Korea. But those countries are far better placed, when the global economy turns around and I am sure they will come out even stronger than they were before the global slowdown. People in the UK and the USA have to start saving, if they are not to repeat what has happened. The boom in the 1920s, which lead to the great depression of 1929-1933 in the USA was largely due to cheap credit and excessive spending. The history is repeating itself.
Pound Sterling continues to slide down
This week, the pound sterling has hit all-time-low against yen, 24-year low against dollar.
As UK economy slides into a recession officially, pound hits new lows against major currencies and FTSE is gone below 4000 level once again since December 2nd, 2008.
Jim Rogers predicts that pound will break its all-time-low record against the US dollar (£1=$1.0520 in Februart 1985). Some experts believe triple-parities may be possible in the near future: £1=$1=€1.
It is hitting UK travellers hard, many deciding not to have holidays abroad or those who already studying or working abroad deciding to come back.
But of course, it should be helping the UK exporters. Despite ever-shrinking manufacturing sector of the UK economy, UK still remains one of the top 10 exporters in the world, exporting goods worth £220bn. However, UK is a net-importer, meaning it buys more goods than it sells in terms of valuation. Therefore, British consumers may find themselves facing higher prices on imported goods, in particular electronic goods and clothing.
As a result of falling pound, the UK is now the sixth largest economy in the world. It once ranked as the fourth largest, before China overtook it. Recently it has been taken over by France and it could be overtaken by Italy if pound continues to depreciate against euro.
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