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Is recession looming?

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Wuffle
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Re: Is recession looming?

#485762

Postby Wuffle » March 11th, 2022, 9:45 am

Blaming govt is not correct.
In democracies, human frailty and numbers wins.
That is why the state pension age remained static when it was quite obvious that skidding through in an office didn't kill you as fast as breathing in coal dust. And the numbers were overwhelming.
The 70's just reflected where the bulk of the population were at the time.

W.

NotSure
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Re: Is recession looming?

#485763

Postby NotSure » March 11th, 2022, 9:46 am

GoSeigen wrote:
Jeez why all the Peston bashing? Do you all think he's a fool? He's talking about a drop in standard of living. If you bashers have data showing falls in real per capita income in the UK during the 1970s -- and that they are worse than what is likely to come with current 5%+ inflation and barely rising incomes -- then you're welcome to share here.


GS


Indeed.

Wages increased significantly for most jobs in the 1970s. Price also rose, but people were still better off in 1979 than they were in 1970.

The average weekly wage in 1970 was £18.37, in 1979 it was £68.92. The 1979 wage in 1970 money was £23.79. An increase of 30%.


https://www.retrowow.co.uk/social_history/70s/earnings_1970s.php

BullDog
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Re: Is recession looming?

#485768

Postby BullDog » March 11th, 2022, 9:52 am

RockRabbit wrote:
BullDog wrote:As has been every government post Thatcher. Excessive debt by government is simply robbing growth from future generations who have to pay for it. The unpalatable and unspeakable (politically) truth is that we don't have a revenue problem in the UK. We have an expenditure problem. The intellectual pygmies in parliament are either of too poor intellect to understand or, even worse, ignore it.

While I loath increases in Govt borrowing, I think they may have no choice at this point. The economy is going to take a massive hit this year due to inflation etc and reducing Govt expenditure at this time would increase that hit and risk making any recession significantly worse.

Also, what expenditure do we reduce to make a meaningful difference? Much of it goes on social care, pensions, defence, police, education and NHS, all of which are struggling under current budgets. (probably a discussion for another thread or we'll go off topic).

I quite agree. But the issue we face today is from past ridiculous government largesse where the UK economy couldn't be seen to have "winners" and "losers". The economic damage has already been inflicted and the next couple of generations at least are going to suffer reduced standards of living as a result. Already it's very obvious that my grown kids are going to be the first generation of our family to have a lower standard of living than their parents. Despite us doing everything we can to support them.

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Re: Is recession looming?

#485781

Postby RockRabbit » March 11th, 2022, 10:11 am

BullDog wrote:
RockRabbit wrote:
BullDog wrote:As has been every government post Thatcher. Excessive debt by government is simply robbing growth from future generations who have to pay for it. The unpalatable and unspeakable (politically) truth is that we don't have a revenue problem in the UK. We have an expenditure problem. The intellectual pygmies in parliament are either of too poor intellect to understand or, even worse, ignore it.

While I loath increases in Govt borrowing, I think they may have no choice at this point. The economy is going to take a massive hit this year due to inflation etc and reducing Govt expenditure at this time would increase that hit and risk making any recession significantly worse.

Also, what expenditure do we reduce to make a meaningful difference? Much of it goes on social care, pensions, defence, police, education and NHS, all of which are struggling under current budgets. (probably a discussion for another thread or we'll go off topic).

I quite agree. But the issue we face today is from past ridiculous government largesse where the UK economy couldn't be seen to have "winners" and "losers". The economic damage has already been inflicted and the next couple of generations at least are going to suffer reduced standards of living as a result. Already it's very obvious that my grown kids are going to be the first generation of our family to have a lower standard of living than their parents. Despite us doing everything we can to support them.

And I agree with you as well! The amount of Govt waste is incredible, and the last couple of years must have broken all records with the PPE and Covid loan scams, the incredible amount spent on track and trace and ridiculous headline grabbers such 'Eat out to help out'.

But we are where we are, and I don't see any easy options here. Of course none of this is helped by having an incompetent Cabinet which appears to be in permanent campaign mode but yes, the political problem does go back much longer.

pje16
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Re: Is recession looming?

#485782

Postby pje16 » March 11th, 2022, 10:15 am

Into the samer waste cataegory as UK GOV go local councils and any large corporation
The bigger the outfit the more layers of management and lack of accountability
you don't even have to take into account disceconomies of scale

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Re: Is recession looming?

#485833

Postby vand » March 11th, 2022, 12:55 pm

US data, but still.
Sometimes a chart summarizes a thousand bulletpoints.
Moderator Message:
The chart below is sourced from the link below. -- MDW1954


https://awealthofcommonsense.com/2022/0 ... recession/

Image

I love Ben Carlson's blog in general. Recommended reading.

MDW1954
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Re: Is recession looming?

#485877

Postby MDW1954 » March 11th, 2022, 3:28 pm

Yes, but as he points out, inflation isn't necessarily a causal factor -- simply a correlating factor.

And most if not all of those prior inflationary spikes were demand-led, not supply-led. For supply-led inflation, the causal link may be quite different, and I wouldn't be surprised if it was.

Incidentally, please read the rules re: posting images. Particularly the bit about copyright.

MDW1954

vand
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Re: Is recession looming?

#485932

Postby vand » March 11th, 2022, 8:08 pm

MDW1954 wrote:Yes, but as he points out, inflation isn't necessarily a causal factor -- simply a correlating factor.

And most if not all of those prior inflationary spikes were demand-led, not supply-led. For supply-led inflation, the causal link may be quite different, and I wouldn't be surprised if it was.

Incidentally, please read the rules re: posting images. Particularly the bit about copyright.

MDW1954


Yes. Sharply rising price are a sign that the economy is not as productive as it should be. Therefore inflationary spikes are a symptom of an overheating economy which naturally then lead to an economic slowdown/downturn. However an economic slowdown/downturn can also be caused by exogenous factors, so not all recessions are preceeded by inflation.

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Re: Is recession looming?

#485934

Postby BullDog » March 11th, 2022, 8:18 pm

vand wrote:
MDW1954 wrote:Yes, but as he points out, inflation isn't necessarily a causal factor -- simply a correlating factor.

And most if not all of those prior inflationary spikes were demand-led, not supply-led. For supply-led inflation, the causal link may be quite different, and I wouldn't be surprised if it was.

Incidentally, please read the rules re: posting images. Particularly the bit about copyright.

MDW1954


Yes. Sharply rising price are a sign that the economy is not as productive as it should be. Therefore inflationary spikes are a symptom of an overheating economy which naturally then lead to an economic slowdown/downturn. However an economic slowdown/downturn can also be caused by exogenous factors, so not all recessions are preceeded by inflation.

The 1970's definitely were. Two oil price shocks. Western economies quickly suffered it's effects.

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Re: Is recession looming?

#485937

Postby Quint » March 11th, 2022, 8:32 pm

Charlottesquare wrote:I think it is somewhat difficult to consider say high energy prices and extrapolate how these will impact when frankly few of us have any idea if said prices are a short term or long term economic manifestation. We also need to consider which producers will ramp production and accordingly settle back any oil price peaks.

After all tomorrow Vlad could enter serious de escalation talks or could alternatively take it nuclear, in which latter case not sure many of us will be that fussed re oil/fuel prices (Except Mad Max, The Road Warrior, of course)

I loved the mad Max films, mighty try building a gyrocoptor.

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Re: Is recession looming?

#486002

Postby vand » March 12th, 2022, 9:06 am

With all that said above.. commodities now look seriously over-extended to me and in the short term more vulnerable to a steep selloff than meaningful further upside.

Maybe we saw an exhaustion gap-up in crude oil last Monday when it hit $139. If so I would expect CPI inflation rate to peak a couple of months later before starting to moderate.

I heldthe JPM Natural Resources fund and the Wisdomtree AGCP ETF as inflation hedges, but sold both recently.

(my chart)
Image

Wuffle
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Re: Is recession looming?

#486025

Postby Wuffle » March 12th, 2022, 10:04 am

I watch 'The Compound' on YT.
Ben Carlson referenced above is part of the team.
In the group chat from last weekend their go to statistics guy presented a fairly compelling chart of broad commodities vs I think S&P500.
Commodities appear to have only just turned a corner after a decade long fall.
No disputing the short term is a bit of a mess.

W.

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Re: Is recession looming?

#486044

Postby OhNoNotimAgain » March 12th, 2022, 10:53 am

vand wrote:
GoSeigen wrote:
vand wrote:I find it difficult to imagine how the rocketing energy and general prices aren’t going to tip us into a recession within,well, let’s say a year.

Both the GFC and the 74 crash were preceded by a large surge in energy and consumer prices. It’s easy for people who have no first hand experience of those events, especially the 1970s, to think that we could never experience it again.

Recessions are always multi-factoral and so just blaming it on one thing is overly simplistic, but sometimes it is clear what breaks the camel’s back, and I think that $130 oil and £1.70 petrol, and doubling utility prices will do it.

The yield curve has also been flattening at an alarming rate and could move to inversion within a few weeks at the rate it’s going. That would surely be the nail in the coffin.

I know that GDP and employment numbers still all look very healthy, but those are lagging indicators... and I remember that in the run up to the GFC they were also very strong, but got revised backwards when the recession started to make it look like the downturn began a couple of quarters before everyone realised they were in fact in a downturn.


Will there be a recession? Yes. But if you think this is a 1970s scenario you're barking in the wrong park.

GS


Can you make an argument why it wouldn't it be a rerun?

We've created so much more currency than ever before, much greater than the true rate of growth in goods and services. Debt is much worse today than it was in the 1970s, therefore governments need the inflation to pay their promises.

For sure, a recession may prove to provide some deflationary relief, but then the monetary tools they will use to stimulate the economy will then sow the seeds for ongoing inflation in the next cycle.

The unfortunate dynamic is that once you left inflation run away, it tends to run and run until you tackle it head-on and get in front of it. It took Paul Volker to raise interest rates to very painful levels to kill the stagflation era - knowing that it would cause a deep recession, but that was the necessary price to pay to get ahead of inflation - do you see anyone who's willing to do the same today? Right now they're scared to raise interest rates by even a few basis points!


And he wasn't re-appointed so the lesson to central bankers is clear. Don't ruin your career for the sake of the economy.

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Re: Is recession looming?

#486072

Postby tjh290633 » March 12th, 2022, 12:08 pm

vand wrote:With all that said above.. commodities now look seriously over-extended to me and in the short term more vulnerable to a steep selloff than meaningful further upside.

Maybe we saw an exhaustion gap-up in crude oil last Monday when it hit $139. If so I would expect CPI inflation rate to peak a couple of months later before starting to moderate.

I heldthe JPM Natural Resources fund and the Wisdomtree AGCP ETF as inflation hedges, but sold both recently.

The answer is to top slice any share which is getting over-extended in your opinion, or gets top heavy in your portfolio. I still hold JPM Natural Resources, having first bought in 1970 at 35p (actually 7/=) when it was Ebor Commodity fund. It became Save and Prosper Commodity in due course, and from 1978 onwards I started subscribing monthly. In 1984 it had a 3 for 1 split, which reduced my starting cost to 11.66p, and in 2002 I converted into accumulation units. There had been no dividends for some time.and in 2019 I converted into Class B Accumulation units. I sold a chunk 4 times, when the share price was climbing, to provide money for various reasons. The IRR to date has been 11.74%, so not to be sneezed at. Had I not sold those 4 chunks, I would be considerably richer.

TJH

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Re: Is recession looming?

#486077

Postby absolutezero » March 12th, 2022, 12:23 pm

vand wrote:I heldthe JPM Natural Resources fund and the Wisdomtree AGCP ETF as inflation hedges, but sold both recently.

(my chart)
Image

Assuming you still think inflation is an issue, where did you put the proceeds?

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Re: Is recession looming?

#486079

Postby absolutezero » March 12th, 2022, 12:25 pm

tjh290633 wrote:The answer is to top slice any share which is getting over-extended in your opinion, or gets top heavy in your portfolio. I still hold JPM Natural Resources, having first bought in 1970 at 35p (actually 7/=) when it was Ebor Commodity fund. It became Save and Prosper Commodity in due course, and from 1978 onwards I started subscribing monthly. In 1984 it had a 3 for 1 split, which reduced my starting cost to 11.66p, and in 2002 I converted into accumulation units. There had been no dividends for some time.and in 2019 I converted into Class B Accumulation units. I sold a chunk 4 times, when the share price was climbing, to provide money for various reasons. The IRR to date has been 11.74%, so not to be sneezed at. Had I not sold those 4 chunks, I would be considerably richer.

TJH

Your meticulous record keeping is a thing of wonder!
Is it ALL digitised now in some giant spreadsheet or are there files and folders in the loft?

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Re: Is recession looming?

#486104

Postby vand » March 12th, 2022, 2:13 pm

absolutezero wrote:
vand wrote:I heldthe JPM Natural Resources fund and the Wisdomtree AGCP ETF as inflation hedges, but sold both recently.

(my chart)
Image

Assuming you still think inflation is an issue, where did you put the proceeds?


I do think it is still an issue and will be for a while yet, but I feel my portfolio is well positioned to cope even without them. Most of my stocks are in ex-US value stocks which should fare better in an inflationary environment, and I have a lot of gold and gold equities. I redirected my funds into those instead.

While they may not be as good for directly hedging against inflation, they are better long long term holds imo.

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Re: Is recession looming?

#486187

Postby tjh290633 » March 12th, 2022, 10:47 pm

absolutezero wrote:Your meticulous record keeping is a thing of wonder!
Is it ALL digitised now in some giant spreadsheet or are there files and folders in the loft?

Some is, but in many spreadsheets and some is still pen and paper.

TJH

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Re: Is recession looming?

#486259

Postby MDW1954 » March 13th, 2022, 12:34 pm

77ss wrote:
MDW1954 wrote:
pje16 wrote:All I was trying to say was that wages not keeping up with inflation is not my defintion of a recession
I'm not sure what is but it's not that !
cheers


The formal definition (in the UK, at least) is two consecutive quarters of negative GDP growth.

MDW1954


Quite. A recession is not defined in terms of living standards or inflation. On the definition given by MDW we had a recession in 2020-2021 - with 5 such successive quarters.

Is another one coming down the pike? I don't know, and I am not sure that fretting about it is any help - que sera, sera.

THe 1956 to date time series may be of interest:

https://www.ons.gov.uk/economy/grossdom ... s/ihyr/pn2


Something bugged me about this time series, right from the start: I didn't remember five consecutive quarterly declines in GDP. By chance (researching something else), I've discovered another quarterly GDP series, which doesn't have five such declines due to Covid:

https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/ihyq/pn2

This series shows pretty much what I remember: a strong recovery in 2020 Q3 GDP. Does anyone know the difference between the two series?

MDW1954

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Re: Is recession looming?

#486325

Postby vand » March 13th, 2022, 5:01 pm

There definitely wasn't 5 consecqutive quarters of negative growth, I believe the rather the chart shows annualized growth on a quarterly basis, so it was 5 quarters where total output was lower than the same quarter in the previous year (Q1 2020- Q1 2021).

The period of contraction was only Q1 and Q2 of 2020.

I think this page shows it more clearly
https://www.ons.gov.uk/economy/grossdom ... s/abmi/pn2


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