U.K. economy continues to contract

The other country with what will, eventually, be called a "basket case" economy - due to its huge, unsustainable twin deficits and dearth of domestic savings that finally resulted in finance and consumption led growth to permanently stall - released new data today indicating that economic growth continued to contract in the third quarter, disappointing analysts who were expecting the first gain in a year-and-a-half.

This report in the Telegraph has all the details:

The economy unexpectedly shrank by 0.4pc in the third quarter, defying expectations that the UK had emerged from recession with 0.2pc growth. Shadow Chancellor George Osborne said the figures were “deeply disappointing”.
The Chancellor however insisted the figures were in line with his forecasts. “I’ve always been clear that growth will return at the turn of year,” he said.

Manufacturing and construction made negative contributions to economic growth and the overall contraction from the start of the recession has now reached 6 percent, the largest since the Great Depression, also known as the Great Slump (at least according to Wikipedia).

John Philpott, chief economist at the Chartered Institute of Personnel and Development, noted that the recession "looks more like a depression" a view that was echoed by Edmund Conway in this piece that also appeared in the Telegraph.

This recession just became a depression
It is difficult to know what to be most shocked by in the gross domestic product figures published by the Office for National Statistics this morning: the fact that we are in the longest-lasting deepest continuous recession in recorded history or that no-one in the City foresaw it*.

Leaving aside the City’s failings, with which we are intimately familiar, the scale of the economic collapse is disturbing. The National Institute for Economic and Social Research has been calling this a “depression” rather than a recession for some time – these figures surely now underline such a description.

Mr. Conway then goes on to break the numbers down a bit with the expected results.

Things don't look very good across the pond and, naturally, at a time like this, many look to assign blame for what has happened and, naturally, economists once again are the prime suspects as detailed in this story at The Guardian.

Economists perform dismally again
City fails to predict longest recession since records began

So, there we have it, the recession is the longest since quarterly records began in 1955 and, guess what, the City again failed to predict it.

The average forecast from economists in the Square Mile was that the economy had expanded by 0.2% in the July to September period. But in fact, according to the ONS's preliminary figures, it contracted by 0.4% - the sixth drop in a row. That's a big forecasting error, really big.

Sure, we had had dismal industrial output figures recently and poor retail sales figures yesterday, but, undeterred, the guys in the City decided those warning signs did not change the view that all the stimulus of 0.5% interest rates and all that quantitative easing, combined with cuts in VAT and a falling pound, were bound to push the economy back to growth in the third quarter.

Of course, these are the same people who failed to see the recession coming so really we shouldn't have even paid any attention to their forecasts in the first place.

Ouch! Economists are really having a bad year.

Bloomberg reports that the crew at the Bank of England (mostly economists, you'd think) may have to print up a bunch more money to help the cause.

Come to think of it, economists are having a bad decade.