# economy starting to turn?



## dockingtrade (18 Mar 2009)

has the world economy hit the bottom and now starting to turn upwards?
Notably the latest stock market performances and the new housing starts in the US.

For us though are we along way behind. Worryingly could interest rates start going the other way soon, and if we are still in high unemployment could that mean even harsher times for unemployed mortgage holders?


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## North Star (18 Mar 2009)

*Re: thinhs starting to turn*

Its too early to tell if we have hit the bottom. The housing starts from the US is only a one month bounce from historically low levels. If we get 3 months or more of improvement then I would pay more attention.
For me its more important that U.S and banks elsewhere are making profits again. We need a good banking system to support economic growth. Keep watching US financiaql ETF to see if the trend has turned.
Re your point on interest rates, I wouldnt worry, we are likely to be in for a shallow rebound and an imminent upward rate cycle is very unlikely as deflation is still the major threat.
I agree with you that Ireland will lag the recovery in a significant way, for investments and pensions we all need to reduce our exposure to Ireland.

I hope you are right about things turning, I just think its too early to say with any confidence.


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## mosstown (18 Mar 2009)

announced today, unemployment now peaking at 2 million in the UK and growing each day.  no sign of any recovery here.


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## mercman (18 Mar 2009)

Easiest way to find out ask somebody in the retail trade or general business. We are a mile off from a pick up. Was in London last week and business there is really very bad. I don't think we will see an uplift until the end of the year but hopefully sooner as it really is becoming quite boring at present waiting for things to happen.


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## Ancutza (19 Mar 2009)

If the unemployment rate in the UK has reached 2 million and is growing everyday then it hasn't peaked or am I being obtuse?


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## csirl (20 Mar 2009)

I think that the economy is beginning to turn, but probably will be a few months before people will feel the effects. I dont think there will be a boom recovery - just slow steady growth. The lack of consumer spending is somewhat down to people holding onto their cash in fear of what the future may bring. As people's confidence recovers more slowly that the reality, it is conceivable that consumer spending will lag behind reality and is not the most up to date barometer of recovery.

A couple of posters have used UK examples of the economy not turning. It must be remembered that in addition to the global problems, the UK is suffering a currency crash, which in its own right would be a big big deal and would have caused a recession anyway. The currency crash problem has not been fixed and may never be - this could be a permanent correction. So what's happening in the UK is a lot worse than what's happening here and the UK will not recover at the same pace as the rest of the world. Unfortunately for us, most people watch UK TV, particularly Sky News etc., and so our consumer confidence is being hammered by the negative messages being broadcast from the UK which may have no relevence here whatsoever.


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## fobs (20 Mar 2009)

csirl said:


> A couple of posters have used UK examples of the economy not turning. It must be remembered that in addition to the global problems, the UK is suffering a currency crash, which in its own right would be a big big deal and would have caused a recession anyway. The currency crash problem has not been fixed and may never be - this could be a permanent correction. So what's happening in the UK is a lot worse than what's happening here and the UK will not recover at the same pace as the rest of the world. Unfortunately for us, most people watch UK TV, particularly Sky News etc., and so our consumer confidence is being hammered by the negative messages being broadcast from the UK which may have no relevence here whatsoever.


 
Being as the UK are one of our biggest export markets and tourist markets then the impact of their recovery (or lack therof) will impact on us.


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## Shawady (20 Mar 2009)

dockingtrade said:


> Worryingly could interest rates start going the other way soon, and if we are still in high unemployment could that mean even harsher times for unemployed mortgage holders?


 
Ireland is in worse position than most of the other euro countries and therefore it is likely that these countries will recover quicker. I would be worried that interest rates would rise too soon for us, which would prolong any recovery further.
The decrease in mortgage repayments has canceled out my recent pay cut.


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## z109 (20 Mar 2009)

fobs said:


> Being as the UK are one of our biggest export markets and tourist markets then the impact of their recovery (or lack therof) will impact on us.


We export twice as much to the eurozone as we do to sterling.


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## Sunny (20 Mar 2009)

We are not even close to turning. Look at the industrial output figures out this morning for the Eurozone. Down 3.5% m/m in January which is atrocious and a fall in Eurozone GDP of around 3-4% is now on the cards. The UK is also in serious trouble and the US has still not bottomed out despite this weeks rally in equities.


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## cork (20 Mar 2009)

Sunny said:


> We are not even close to turning. Look at the industrial output figures out this morning for the Eurozone. Down 3.5% m/m in January which is atrocious and a fall in Eurozone GDP of around 3-4% is now on the cards. The UK is also in serious trouble and the US has still not bottomed out despite this weeks rally in equities.


 
Together with cuts of billions in govt spending and more taxes - the tide won't turn here  for years.


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## meatmonger (20 Mar 2009)

another 100,000 people will lose their jobs.
after this, the economny might bottom out.  

many people simply don't have money.

question is what industries are going to provide the growth?


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## scoobynutta (24 Mar 2009)

csirl said:


> I think that the economy is beginning to turn, but probably will be a few months before people will feel the effects. I don't think there will be a boom recovery - just slow steady growth. The lack of consumer spending is somewhat down to people holding onto their cash in fear of what the future may bring. As people's confidence recovers more slowly that the reality, it is conceivable that consumer spending will lag behind reality and is not the most up to date barometer of recovery.
> 
> A couple of posters have used UK examples of the economy not turning. It must be remembered that in addition to the global problems, the UK is suffering a currency crash, which in its own right would be a big big deal and would have caused a recession anyway. The currency crash problem has not been fixed and may never be - this could be a permanent correction. So what's happening in the UK is a lot worse than what's happening here and the UK will not recover at the same pace as the rest of the world. Unfortunately for us, most people watch UK TV, particularly Sky News etc., and so our consumer confidence is being hammered by the negative messages being broadcast from the UK which may have no relevance here whatsoever.


 
I'm sorry, I don't really agree with much of your post. Sterling has lost value against the dollar and the euro, but it was too high to begin with. The value correction in the pound has made imports more expensive and exports much cheaper. I fail to see how this is a major problem for the UK economy as a whole. You'll find much more imports from the Uk and less exports to the Uk as a result of the devaluation of the pound. Something that could effect Ireland in quite a bad way since both countries are major traders with each other, particularly in tourism and farming.

As things stand I feel the UK will come out of recession quicker than the cumbersome eurozone, especially with the fiscal stimulus that the UK has embarked on to create demand, unmatched globally apart from the US. And of course the relaxed approach to sterling being in effect devalued. Yes after the spending spree there will be a financial hangover to be paid by extra taxes, but there is returning confidence in the Uk economy despite what you 'may' interpret from the more sensational aspects of the UK media. 

The powerhouse of the Eurozone (Germany) will be posting far worse recessional figures than the Uk will be. Added to this the basket cases of the Euro, ie Greece, Italy and Spain, I'm quite happy the UK didn't join the Euro when everybody else did. There's more than a sniff of strait jacket policies for all the countries that are obviously economically out of sync with each other with little degrees of flexibility for each individual country. This can only hamper recovery.

There are some encouraging signs in the UK housing market with 3 months of continued increases of mortgage borrowing and reported increases in property inquiries. With interest rates at .5%, stamp duty holiday and lower vat rates, now is the time to buy and many are realising it. Especially as employers are exploring other avenues with workforces instead of redundancy. Pay freezes and reduced working hours are extremely common in the UK now and are used in many cases instead of enforced redundancy.

So it's not all doom and gloom! I've been told I'll not be getting a pay rise this year but I've already booked and paid for a wedding and a new car despite not earing a fortune


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## csirl (25 Mar 2009)

I think you've being listening to too many Labour spin doctors.



> There are some encouraging signs in the UK housing market


 
3 bed semis in major cities selling for less than 100k - not very encouraging. 



> Especially as employers are exploring other avenues with workforces instead of redundancy. Pay freezes and reduced working hours are extremely common in the UK now and are used in many cases instead of enforced redundancy.


 
Not what my sources living in UK say. UK has been hit very hard with redundancy. The job market in midlands and north is non-existant - even min. wage jobs.



> The value correction in the pound has made imports more expensive and exports much cheaper. I fail to see how this is a major problem for the UK economy as a whole.


 
UK is a net importer. Significant hikes in consumer good prices i.e. electrical goods, cars, clothes etc. over the coming months will hit the ordinary punter. A devalued currency also means the price of imported fossils fuels will be higher.



> Yes after the spending spree there will be a financial hangover to be paid by extra taxes,


 
There is a major problem with this statement. Uk does not have much scope to increase direct taxes. Those on minimum wage are already in the tax net. Compare it with Ireland where 40% are outside the tax net, so you can raise revenue by expanding the tax net to include everyone. UK does not have this option. Brown borrowing a load of money to bail out the banks was a panic move that the UK will pay for for years to come. The money did not alter confidence in british banking and so was wasted. The amounts borrowed are 10ks per taxpayer. How can they pay this back, particularly with a lot of the workforce on low wages?


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## Joody1 (25 Mar 2009)

I feel that the UK is in a weak position,  unemployment has passed 2 million and rising.  The BoE has warned Brown against borrowing more to spend its way of the recession.

http://news.bbc.co.uk/1/hi/business/7961900.stm


  [FONT=&quot][/FONT][FONT=&quot]http://news.bbc.co.uk/1/hi/business/7959564.stm[/FONT]


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## scoobynutta (25 Mar 2009)

csirl said:


> I think you've being listening to too many Labour spin doctors.


 
Quite wrong I'm afraid. I have never voted Labour and do not follow their dogma and spin. My observations are of someone who lives in the UK and understands the economic situation quite well. I guess I'm a glass half full kinda person rather than a half empty glass bloke who then throws it at the wall crying.




> 3 bed semis in major cities selling for less than 100k - not very encouraging.


No doubt if you tried hard enough you'd find a skanky rundown semi for £100k in a city, but it wouldn't be anything I'd buy. A quick review of sold prices in my postcode show that the last semi sold a few months back for over £230k  Not bad for a town with a poor reputation in the UK (Luton).



> Not what my sources living in UK say. UK has been hit very hard with redundancy. The job market in midlands and north is non-existant - even min. wage jobs.


 
Yes there have been lots of people been made redundant, I'm not denying it. People have been made redundant in every western economy. What I have said is many have taken pay freezes/cuts instead of redundancy. It is very common. I personally know several people who have lost their jobs and found other employment fairly quickly. Yes there will be more unemployment and redundancies in the economy, but I think the worst has already happened.




> UK is a net importer. Significant hikes in consumer good prices i.e. electrical goods, cars, clothes etc. over the coming months will hit the ordinary punter. A devalued currency also means the price of imported fossils fuels will be higher.


 
The ordinary punter will switch to goods/products made in the UK to offest the lowering of the currency. A good example would be many more people holidaying at home this year instead of going abroad. Many imports are so called luxury items which will simply not be purchased at all.




> There is a major problem with this statement. Uk does not have much scope to increase direct taxes. Those on minimum wage are already in the tax net. Compare it with Ireland where 40% are outside the tax net, so you can raise revenue by expanding the tax net to include everyone. UK does not have this option. Brown borrowing a load of money to bail out the banks was a panic move that the UK will pay for for years to come. The money did not alter confidence in british banking and so was wasted. The amounts borrowed are 10ks per taxpayer. How can they pay this back, particularly with a lot of the workforce on low wages?


 
I did say the increases in public spending will result in a hangover. By a hangover I meant that we'll be paying for this later when the economy improves. Taxes will rise in the future to pay for all of this. There is always scope for raising more taxable income in an improving economy.

The fiscal policies they have implemented won't create miracles overnight, you'll have several months leadtime for interest rates alone making an impact, let alone quantitive easing or toxic loan guarantees. To say the policies have been a waste of time is facile. The average UK wage BTW is in the region of £33k, hardly low wages.


Of course the UK is in a weak position, everyone knows that. But tell me a Eurozone country which is in a very good position in these times? I still say the UK will be one of the first European economies to pull out of recession.


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## csirl (26 Mar 2009)

We could argue about this all day, but ultimately time will tell and I'm very confident in my prediction.

A good indicator of what the market thinks came this week - bonds issued by the Irish Government thru the NTMA were way over subscribed. The UK couldnt shift the bonds it had planned to issue.


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## scoobynutta (26 Mar 2009)

Yes, a small percentage weren't sold. What the market thinks and how the economy actually unfolds can and usually is quite different  I've been quite busy buying shares at the moment whilst many 'in the market' have been dumping them.


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## tiger (26 Mar 2009)

csirl said:


> We could argue about this all day, but ultimately time will tell and I'm very confident in my prediction.
> 
> A good indicator of what the market thinks came this week - bonds issued by the Irish Government thru the NTMA were way over subscribed. The UK couldnt shift the bonds it had planned to issue.


 
Yes, but at a price:
http://www.bloomberg.com/apps/news?pid=20601085&sid=aMuvbzkNlJ7Y&refer=europe


> The difference in yield, or spread, between Irish and German 10-year government bonds widened to 284 basis points on March 19, the most in 10 years. It narrowed 23 basis points today to 249 basis points, the least since March 3. The spread was 38 basis points a year ago and the average over the past 10 years is 18 basis points.


 
In other words in order to borrow, we're still paying over 2% more that we normally would have to.  That's €20M a year extra for this issue alone.


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## meatmonger (26 Mar 2009)

csirl said:


> We could argue about this all day, but ultimately time will tell and I'm very confident in my prediction.
> 
> quote]
> 
> ...


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## z103 (26 Mar 2009)

> sounds good.  just curious what is going to be the driver of the turn in this country?


The US.


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## meatmonger (26 Mar 2009)

all bets on the US?

which industry sectors here are the benificaries?


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## Sunny (27 Mar 2009)

csirl said:


> We could argue about this all day, but ultimately time will tell and I'm very confident in my prediction.
> 
> A good indicator of what the market thinks came this week - bonds issued by the Irish Government thru the NTMA were way over subscribed. The UK couldnt shift the bonds it had planned to issue.


 
There is a difference. The UK was trying to shift 40 year bonds. Ireland goes no where near that end of the curve so you can't compare. They sold inflation protected gilts the next day and were more than two times over subscribed.  
I do agree with you though the UK is probably in a worst state than Europe at the moment.


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## scoobynutta (27 Mar 2009)

Sunny said:


> I do agree with you though the UK is probably in a worst state than Europe at the moment.


 
As far as I'm aware this wasn't about the UK or Europe being in a worse state than the other, but which will come out of recession first. Unless I've missed something? 

However, I think there is a consensus that says the UK is in a worse state, and that's something that I agree with. Due to being out of the relatively stable conditions of the Eurozone, the UK will do better in the good times and worse in the bad times than Eurozone.


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## Caveat (2 Apr 2009)

Well here are two positive statistics:

_"UK house prices rose for the first time since October 2007 according to the latest figures released this morning by Nationwide.__This follows a stronger than expected survey for  UK manufacturing yesterday which signalled an easing in the pace of decline."_ 

_"(IRL) In March, the numbers claiming unemployment benefit rose by 20,000, or 5.7%, from a month earlier, following a rise of 26,700 (8.2%) in February. So far, January of this year has represented the spike in claimant increases in any month, with a record 33,000, or 11.3%, rise. While the lower monthly rate of increase in numbers signing on is certainly welcome, it is too soon to rule out a new spike in coming months, given the significant deterioration in the Irish labour market that we anticipate."_

Both from the Ulster Bank's economists over the last couple of days.

Of course two swallows etc


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## smiley (3 Apr 2009)

From Davy..
There was some good news on the public finances ahead of next week's Budget as
the pace of decline of tax revenue stalled. That was driven mainly by a smaller
percentage drop in income tax in March than in February. The improvement in
March may partly reflect the somewhat smaller rise in the Live Register than was
recorded in the previous month.

Tax revenue fell 22.4% year-on-year (yoy) in March compared with 31.4% in
February and 19% in January. That means revenue was down 23.4% in the first
quarter overall (it had been 23.8% lower after two months cumulatively).
Excise duty and VAT did not slide quite as significantly as they had in February. But
last month's declines of 29.8% and 20.6% were still sharp.
In the first quarter, expenditure increased by 6.1% yoy. Capital spending actually
fell 6.4% (in line with the new target outlined in February), but current spending
was up 8.2%. Much of this increase is accounted for by the automatic stabiliser of
higher social welfare payments. But the rest of current expenditure has to be
addressed in next week's Budget.
Successful fiscal consolidations have focused more on spending rather than on tax.
That is because lowering the economy's cost base makes businesses more
profitable and, hence, they are more likely to invest. In addition, we do not want to
lose our valuable human capital by going too far on tax.


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## Snarl (6 Apr 2009)

Report out today gives two crumbs of comfort for those looking for evidence that the economy is turning, suggesting that:
1. the fall in house prices in Q1 was smaller than in Q4 08 - 4% as opposed to 6%... does that represent turning though?
2. the number of houses for sale has fallen by 5% from October to now... then again, it's still twice the level it should be!

The daft.ie economist who was on Newstalk this morning has some more commentary on the report here:
http://ronanlyons.wordpress.com/200...since-the-start-of-2009-latest-daftie-report/

Liam Delaney of UCD talks about the psychology of economics and the housing market here: http://www.daft.ie/report


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## Chris (7 Apr 2009)

Snarl said:


> 1. the fall in house prices in Q1 was smaller than in Q4 08 - 4% as opposed to 6%... does that represent turning though?


A turning point will be very clear: when house prices from one quarter to the next do not fall or, god forbid, even rise.



Snarl said:


> 2. the number of houses for sale has fallen by 5% from October to now... then again, it's still twice the level it should be!



I would imagine that a lot of people have either given up the hope of selling their house at something close to what they would like to get, or are not able to sell due to negative equity being too high, and therefore have taken their houses off the market. Bottom line is, supply and demand are are still very far apart, and prices won't stabalise until this is back in balance.

If there were any signs at all that the global economy was about to take a turn for the better, then there would be no need or justification for a $1trillion injection as decided at the G20 summit.


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