In These New Times

A new paradigm for a post-imperial world

Sterling dives as UK economy posts shock Q4 contraction

Posted by seumasach on January 25, 2011

All this has to be seen in the light of grossly understated inflation figures. Anyone can see the high street trading has been dying for some time. We are a nation of consumers or we are nothing: we’re certainly not a nation of producers. The anti-euro campaign seems to be running out of steam and so there is nothing left to protect the pound. The property market is dead. We have a record trade deficit and unrivalled mountains of debt. A sharp reality check is on the way and we face it virtually friendless- the US won’t be in any kind of shape to help out. What looms ahead is frightening, almost unimaginably so.

Investment Week

25th January, 2011

UK GDP contracted by 0.5% in the last three months of 2010, shocking economists who had predicted growth of between 0.2% and 0.6% and sending sterling into freefall.

It was the first contraction in growth since the third quarter of 2009, according to the ONS, and comes as a blow to the UK’s prospects for economic recovery.

Business services and finance, construction and distribution, hotels and restaurants were the largest contributors to the negative growth.

The ONS blames bad weather for the decline and says without it, growth would have been flat.

“We should emphasise this assessment of the effect of the bad weather is the best we can make it at this stage, but is still inevitably uncertain,” the report says.

The economy grew by 0.7% in the third quarter of 2010 and 1.7% for the same quarter the previous year.

Sterling plummeted 1.26% against the dollar to 1.5786, and 0.9% against the euro to 1.1617.

Jeremy Cook, chief economist at World First, says the figures are shocking and have had a major impact on the pound.

“Sterling has been seriously destabilised by these figures and traders are now abandoning all hope the Bank of England will raise interest rates sooner rather than later.

“This opens the door to ‘stagflation’ a combination of high inflation and stagnant growth which would see the economic recovery snuffed out.

“To be honest, although this is only a preliminary figure, this is a real shocker.”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: