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Friday, 25 October 2013

GDP figures show strong growth

It seems like only yesterday when we were talking about triple dips and the collapse of the Eurozone.  Well, the latest statistics from the Office of National Statistics (ONS) shows that the economy grew by 0.8% in the 3rd Quarter of 2013.

To further underline the strong performance the figures actually indicate that the economy is 1.5% ahead of where it was this time last year.  This is relevant as that was the period during the Olympics.  Mind you lots of people stayed at home and watched the games rather than going out and spending money!

Construction has shown strong growth but it is still 12.5% below the levels seen at the peak.  Housebuilders have been boosted by the Help to Buy Scheme.  Meanwhile the service sector, often seen as the powerhouse of the UK economy is now above its levels at the peak by 0.6%

Other indicators have pointed to an improving picture.  The Markit's purchasing indexes have shown an improvement, unemployment has been falling, retail sales have been improving and the insolvency rate has been falling.

Now wait, that last one, the insolvency rate, is an interesting one.  Historically, if the economy improves after a recession then the insolvency rate actually rises....

Why is that?  

Simply because creditors get tougher when they think there is a better chance of getting the money and banks look to call in loans when there is a market for assets if the business cannot survive.  Also if they want to lend to a growing company they will need to stop lending to a failing one.    There is some evidence of this occurring recently as Scotland's insovlency rate is beginning to increase and there have been a few high profile failures recently such as WR Refrigeration.

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