Monday, 15 July 2013

Is the UK economy picking up?

We have heard in the last few weeks a set of upgrading by various monetary agencies including the IMF who have upgraded the UK’s growth figures for the coming period. Is this optimism to be believed or is this the markets reacting to a quieter time in the summer months as markets tend to slow during the summer months somewhat. It is a bit of a mixed picture on the global scale with China still rocketing ahead there is still this hard landing being talked of and how China can land as softly as possible without crashing the system. China is hugely in debt and is increasing that debt all the time. “The interesting development is that there has been a pick-up in the pace of expansion since April in the UK and Japan. This would seem to confirm that the fear of a ‘triple-dip’ or ‘double-dip’ recession in the UK was unfounded. Indeed, now all the economic forecasters are raising their guesses on UK expansion, including the IMF, from their dismal forecasts of a few months ago. But just as the forecasters overdid their view on the UK to the downside, they are probably now swinging to be over-optimistic on the upside. At best, UK GDP is going to grow by just 1% in real terms this year and even less per head of population. And the world economy as a whole is slowing down in its expansion. driven by slower growth in China and the other major emerging capitalist economies. Just as the very weak recovery in the advanced capitalist economies dragged down overall global growth between 2009-12, now it seems that the supposedly fast-growing emerging economies will dampen the impact of any relatively faster growth in the advanced economies. In particular, the Chinese economy slowed to 7.7% a year in Q1-2012 from 7.9% at the end of 2012. It is going to be even slower in the quarter just gone and through the rest of the year. Of course, a real growth rate of 7%-plus is huge compared to the rest of the world, but it is not enough to absorb the flow of new labour into Chinese industry and services. Elsewhere, Brazil, India and other major emerging economies are also slowing. But it is the US economy that remains key to the health of the world capitalist economy – it remains the largest, the biggest trader and the dominant financial force. And if we look at the US economy through the eyes of its combined manufacturing and services sector PMI, it remains stuck in a low-growth path, where it has been for almost the whole time since the end of the Great Recession. If anything, the trend is for even slower growth going forward.” So the UK is trapped in an up and down cycle depending on wider forces be it the Euro zone or the US economy which are all linked into the UK. The UK of course exports 50% roughly to the Euro zone so what happens in the Euro zone will be crucial to the UK’s so called recovery. It is true the UK has seen a little bit of growth but I do think the economists who have had gloomy news for a few years now are clinging onto any bit of positivity they can and as a result being far too optimistic now after months of pessimism. “Much has been made of the latest US jobs figures. Employment rose 195,000 in June and after upward revisions for previous months, it seems that average employment growth is now 200,000 a month, higher than the less than 150,000 in the first quarter of this year. But that increase has not made much of a dent in the unemployment rate because more Americans out of work have attempted to look for jobs after having given up for a while. Indeed, the measure of long-term unemployment rose in June, from 13.8% to 14.3%—the highest level since February. This suggests that new jobs are being snapped up by new claimants while those who lost their jobs in the Great Recession remain on the scrap heap, with their benefits being cut or expiring. Moreover, just as in the UK, most of these new vacancies are not full-time permanent jobs at good wages, but part-time, low grade work. The number of people working part-time rose by 322,000 to 8.2 million. These people aren’t working part-time because they want to—it’s because they can’t find full-time work. And of the jobs created in June, 60% were in low-paying positions: 75,000 jobs were created in the leisure and hospitality sector and 37,000 jobs were created in the retail sector. This will eventually translate into low or falling productivity in the US economy, just as it has done in the UK. US corporations are taking advantage of the huge reserve army of labour still out there to introduce part-time and temporary jobs to save labour costs – reduced benefits, no holiday or sick pay etc.” This is one of the tactics currently being used to try and keep the rate of profit up as best they can in the face of huge economic difficulties world over. It will not and cannot last. Capitalism is in a rut it is struggling to get out of. Only re organising society along democratic socialist lines with workers gaining power and owning the means of production and socialising production could we see an escape for the working class’s across the world. With extracts and references from “Marks indicate extracts for clarification

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