UK economy

The UK economy supposedly declined by 0.5% in the 4/Q of 2010, having been expected to grow by that amount. Shock, horror, blame it all on the snow, the MPC and the Government. The bad weather in December will undoubtedly have had an adverse impact particularly on the retail sector but there should be a rebound in the current quarter. But it is more than likely that the figures are a nonsense and that revisions will reverse this to a small gain. The manufacturing PMIs show a completely different picture for the British economy with strong growth from August onwards all the way through to January. It looks as though there is some favourable rebalancing of the economy going on with a shift from consumption to manufacturing, which is all to the good. If the economy were as weak as these figures imply, then we would see weakness in the exchange rate, something that has not materialised. The other thing to remember is that even if the critics are right to lambast the Government for an overly tight fiscal stance, the exchange rate can always take the strain, an option not open to the PIIGS.