Original Article: http://blogs.wsj.com/source/2012/06/01/jubilee-will-lengthen-u-k-recession/
As Britons celebrate Queen Elizabeth II's 60 years on the throne with one extra holiday, the UK economy is likely to suffer from this day off. Although national holiday usually boosts consumption, the fact that national output will come to a stop for the day exerts exceptional pressure on the GDP for the second quarter. Furthermore, some factories, especially smaller ones, are likely to shut down for up to a week. The significant loss on output will negatively influence the GDP calculation for the second quarter and leave it very little time to recover. As can be expected, a bad quarterly GDP number will dampen market confidence, discouraging business from expanding and households from consuming. This will be likely to further decrease the GDP value for the year. As the UK has unexpectedly returned to recession in the first quarter of 2012, this blow will be vitally destructive as UK strives for a recovering economy.
Tuesday, June 5, 2012
9th Week Post on Economics News about the UK
Original Article: http://www.nytimes.com/2012/06/05/business/global/nervous-europeans-snap-up-london-property.html?_r=1&src=me&ref=business
As is reported by the New York Times, foreign investors, particularly European investors, are flooding into the prime real estate industry in London. With a deteriorating economy in the Euro Zone, European investors are seeking safe shelter to preserve the value of their wealth. Among all options, with a relatively stable economy and averagely high value of prime property, expensive London flats are favorite with most investors. The tremendous capital inflow infers a trade deficit in the UK. This can be proved by looking at the national accounting equation, Y = C + I + G + NX. (Y - C - G) refers to national saving, and (Y - C - G) - I is the difference between saving and investment. Capital inflow implies net foreign borrowing. That means saving is less than investment; equivalently, (Y - C - G) - I < 0. Since (Y - C - G) - I = NX, we have NX < 0. Therefore, export is smaller than imports; the UK is having a trade deficit. This can be verified by looking at the international trade data for the UK. The most recently published government information indicates a trade deficit of 2.7 billion pounds in March. The gap between exports and imports can be exacerbated as the increasing demand for British Pounds increases the value of GBP, leading to more expensive British goods and declining exports.
As is reported by the New York Times, foreign investors, particularly European investors, are flooding into the prime real estate industry in London. With a deteriorating economy in the Euro Zone, European investors are seeking safe shelter to preserve the value of their wealth. Among all options, with a relatively stable economy and averagely high value of prime property, expensive London flats are favorite with most investors. The tremendous capital inflow infers a trade deficit in the UK. This can be proved by looking at the national accounting equation, Y = C + I + G + NX. (Y - C - G) refers to national saving, and (Y - C - G) - I is the difference between saving and investment. Capital inflow implies net foreign borrowing. That means saving is less than investment; equivalently, (Y - C - G) - I < 0. Since (Y - C - G) - I = NX, we have NX < 0. Therefore, export is smaller than imports; the UK is having a trade deficit. This can be verified by looking at the international trade data for the UK. The most recently published government information indicates a trade deficit of 2.7 billion pounds in March. The gap between exports and imports can be exacerbated as the increasing demand for British Pounds increases the value of GBP, leading to more expensive British goods and declining exports.
8th Week Post on Economics News about the UK
Original Article: http://www.bloomberg.com/news/2012-06-04/german-2-year-yield-drops-below-zero-as-crisis-deepens.html
Spanish bond yields rose as the Spanish Prime Minister urged European leaders to protect banks in the Euro zones. The rising bond returns signal a stabilizing Spanish bond system. Further, a falling unemployment rate in Spain boosts market confidence. Consequently, it is expected that investor confidence on the Spanish economy will be slightly gained back upon the promising economic indicators. A most direct effect over the British economy will be that, as Spanish bond yields go up, investors will direct their capitals into Spain, which will reduce investment on British bonds. As a result, the demand for British pounds will go down, leading to British Pounds depreciation. The change in British Pounds value will in turn influence trades between the UK and other countries in the world.
Spanish bond yields rose as the Spanish Prime Minister urged European leaders to protect banks in the Euro zones. The rising bond returns signal a stabilizing Spanish bond system. Further, a falling unemployment rate in Spain boosts market confidence. Consequently, it is expected that investor confidence on the Spanish economy will be slightly gained back upon the promising economic indicators. A most direct effect over the British economy will be that, as Spanish bond yields go up, investors will direct their capitals into Spain, which will reduce investment on British bonds. As a result, the demand for British pounds will go down, leading to British Pounds depreciation. The change in British Pounds value will in turn influence trades between the UK and other countries in the world.
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