The British economy

Isn't it amazing how Britain is always heading for recession, but never seems to arrive?! Always the risk, but never the reality (sic)!

UK heads for triple dip as factories slump, mortgage

lending slides

The risk that Britain is entering its third recession in four years grew on Friday with figures showing that manufacturing shrank unexpectedly last month and mortgage approvals for home buyers dropped in January.

Reuters,

1 March, 2013

Gross domestic product fell at the end of last year, bringing Britain within sight of another recession and the latest data suggested the central bank may need to do yet more to revive the economy.

The pound sank to its lowest level against the dollar in more than 2-1/2 years, while prices of British government bonds - which the Bank of England could resume buying - rose after the releases.

The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) fell to 47.9 from a downwardly revised 50.5 in January, confounding forecasts for a rise to 51.0. It was the first reading below the 50 line that separates growth from contraction since November.

A separate release showed that mortgage approvals fell unexpectedly despite the authorities' efforts to boost lending.

"It's a bit of a double whammy of disappointing news," said Alan Clarke, economist at Scotiabank. "Not a good start (to the year) and really shouldn't change anyone's view that there's precious little growth momentum in the UK and particularly not in manufacturing."

The numbers are the latest in a string of bad news for the Conservative-led coalition government and its Chancellor George Osborne. Moody's downgraded Britain's triple-A rating last week, prompted by weak economic growth prospects.

In the last quarter of 2012, a plunge in factory output - which accounts for around a 10th of the economy - shaved 0.1 percentage point off economic growth, according to official data released earlier this week. Markit said factory output fell last month at the fastest pace since October.

"The return to contraction of the manufacturing sector is a big surprise and represents a major setback to hopes that the UK economy can ... avoid a triple-dip recession," said Chris Williamson, the Markit economist who compiled the survey.

"A strong rebound is needed in March to prevent the sector from acting as a drag on the economy as a whole in the first quarter."

OUTLOOK DIM AS ORDERS FALL

On some measures, the chances of such a rebound look slim. The subindex for new orders fell to 46.6 in February, the lowest reading since July, as market conditions remained tough at home and abroad, especially in Europe. Backlogs of work also shrank.

However, Williamson said there were good reasons to believe manufacturing could recover in March, noting that the weaker pound might help exporters, while factories were also hit by disruption to deliveries from bad weather in late January.

"The Chinese New Year holidays are having an increasingly disruptive impact on global trade flows ... and appear to have had a stronger than usual effect in February," he added.

The housing sector also revealed signs of weakness.

Mortgage approvals fell to 54,719 in January from 55,632 in December, short of analysts' forecasts for a rise to 56,500, the central bank said.

A rise in the flow of credit in recent months, particularly in home loans, fed hopes that the BoE's flagship Funding for Lending Scheme is helping home buyers, though lending to companies remains sluggish.

Mortgage lending grew by 147 million pounds, the smallest increase since August, also less than forecast.

Fuel consumption plummets as slump drives motorists off roads

Consumption of diesel and petrol in Britain has plunged by a fifth since the start of the credit crunch, according to a new analysis

the Independent,

1 March, 2013

The motor industry sought to explain the fall in light of the increasing fuel efficiency of cars and the impact of the economic downturn, which has resulted in a temporary reduction in vehicle use.

However, environmentalists claimed the figures are proof of shifting attitudes towards motor travel in the developing world which has seen the number of journeys steadily falling from a peak in the mid-1990s.

The Government is widely anticipated to be planning a new round of road building projects to stimulate the economy ahead of the next general election and to meet the Department for Transport’s projected 44 per cent growth in traffic by 2035.

But the analysis by the Office of National Statistics shows that households are struggling to cope with the near doubling of vehicle fuel prices in the past decade. Between 2002 and 2008 spending on vehicle fuel per head per quarter increased from £84 to £130. But since then average spends have dipped – despite soaring petrol prices – falling to a low of £103 in 2009.

The ONS figures showed that consumption – the quantity of petrol purchased – has plunged 18 per cent since 2007. The figures come after an AA Populus Poll showed that seven out of 10 drivers said they intended to make fewer journeys because of fuel prices.

The number of driver journeys by car or van has fallen seven per cent since 1995, according to the most recent National Travel Survey. Andrew Pendleton, head of campaigns at Friends of the Earth said fuel efficiency and the economic crisis could not explain the long term decline in car journeys or a growing lack of appeal that motor vehicles held for young people. “There is strong and building evidence that car use has peaked not just in the UK but the US, France, Germany and other developed nations,” he said. “The decline is most marked in younger people whose status is defined by different sorts of technology. They want iPads and iPhones rather than a car,” he said.

But Paul Watters, head of public affairs and road and transport police at the AA said there was an “unbreakable link” between traffic growth and the economy and it was imperative the Government was prepared for the eventual upturn.

“The majority of people cannot imagine life without their car. We have seen this in the past in the 1990s and in previous recessions. It will undoubtedly get back to previous levels when the economy improves. Looking at different predictions for the future we are going to have to start making plans for when the current network fills up,” he said.