I am really hoping that one of these mornings I am going to wake up to some good economic news. But today was definitely not that day. The continuing flow of bad news on top of bad news is something we are all now becoming accustomed to.
I can only imagine how Vince and George feel every day when they open the economics and business pages of the newspapers. I did think it was time to try to be optimistic but I could find zero good news on the economics front; sorry. Neither Papendreou nor Berlusconi’s resignations appear to have calmed the market’s nerves.
Today started with an email from REC/KPMG’s report on Jobs showing that the number of permanent placements had gone into negative territory. Recall that the latest labour market estimates from the ONS showed that employment had fallen over the last quarter by 178,000. So this is very bad news as it suggests that the labour market is headed downwards fast. Unemployment is set to rise again and there is every likelihood that youth unemployment will hit the million mark very soon.
No wonder there are thousands of youngsters on the streets of London, to this point protesting peacefully, about the government’s lack of a credible higher education policy or any strategy to deal with rising youth unemployment.
But the bad news continued to flood in all morning. First there was the ONS publication of August’s trade in goods deficit revised from £7.8bn to £8.6bn, but the deficit then widened further in September to £9.8bn – the biggest on record.
Second the CBI cut its growth forecast for 2011 to 0.9 per cent from 1.3, and for 2012 to 1.2 from 2.2 per cent, which is slightly more optimistic than NIESR’s estimate yesterday of 0.8 and 0.9 per cent – recall that the OBR expects 2.6 per cent in 2011 and 2.8 per cent in 2012.
Third, the ICAEW/Grant Thornton Business Confidence Monitor showed business confidence has collapsed – companies are as gloomy about the outlook now as they were in the depths of the recession. The slump in sentiment pointed to a 0.2 per cent drop in GDP in Q42011.
And finally, we mustn’t forget Italy – their 10 year bond yields were up 66bp at 7.37 per cent at noon today which is in bailout territory. Spanish yields were also up at 5.7 per cent. Greek yields are already over 25 per cent while 10 year Portuguese yields are over 11 per cent. This suggests the eurozone is heading into recession which hurts the UK economy which also now seems headed that way. Q42011 and Q12012 look likely to have negative GDP growth, which is consistent with a technical definition of a recession.
So the headwinds continue to gather. The Autumn Statement at the end of the month looks like it is going to be too little too late to prevent the UK economy going back into recession. I did warn them.