A James Alexander post
In the current absence of the excellent Britmouse we shall have to start covering UK NGDP here at this site. He was getting a bit overoptimistic anyway. And it is not good news this week.
The first estimate release of GVA (a cut down version of NGDP) last month had warned of a sharp slowdown in NGDP in the UK during 2Q. This was confirmed. Money is tight in the UK and yet we have the same “normalization” charade from our own MPC that we see at the Fed.
It is not surprising that we have a slowdown in the UK given the fiscal tightening, seen very visibly in the sharp rise in tax revenues with more to come, allied to the strangulation effect of the 2% inflation ceiling. (Note to Keynesians: fiscal policy can be conducted via taxes too.)
The “inflation” that the MPC should be worried about is worryingly low and going lower as shown in the Implied GDP deflator.
For sure there has finally been some modest pick-up private sector wage growth, as in the US. But, as in the US, too, the capitalist classes seem to want to stop prosperity spreading to the masses by active monetary tightening. These hawks should be careful of what they wish for … Syriza, Podemos, Jermey Corbyn and Trump/Sanders mania.
I wonder whether Governor Carney will be reflecting the “normalization” mania or looking at the (real) nominal data this morning in his Jackson Hole party piece?