Europe to Fall Into Recession - What Does That Mean in U.K.?
 

Read this news story on BBC website today. Wondering if people in U.K. who post on this board are noticing anything different in their lives? We are planning to be in England in October - will we notice anything different? Higher fuel prices, obviously, anything else?

http://news.bbc.co.uk/2/hi/business/7607920.stm

Dollar going furthr, a lot of discounts in the shops, a slight drop in traffic levels (motorists are cutting down on unnecessary journeys), hotels and restaurants with vacancies.

We just talked about this last night. Food prices are increasing, travel costs increasing massively, crude oil prices was decreasing til the Arabs decided to decrease production... lots of signs pointing to a slight recession.

Luckily I'm in the Netherlands :)

More business for pubs? Less business for pubs? I wonder....

There is never less business for pubs..

There is definitely less for estate agents (like we're all in heartbreak over that!), but I imagine there will therefore be more for DIY shops and anywhere helping people to grow their own veg, knit their own socks or whatever. Bike shops seem pretty busy.

With the exception of estate agents, and possibly car dealerships, I think those businesses suffering at this stage are ones with weak business models, poor management, etc.

I have certainly been in some remarkably busy restaurants in the past few weeks, and there were lots of tourists in Bath last Sunday.

The three really obvious effects for me are that petrol, fuel (as in household electricity/gas) and food have noticably increased in price.

Bizarrely, petrol prices have gone down locally - from about £1.19 a month or two back, to £1.11 - £1.14 this week.

Since the price of practically everything else is dictated by fuel costs (haulage costs) it'll be interesting to see what this does to rising food prices.....though I'm willing to bet it'll be a big fat nothing......

Having been in England in 2006, it will be interesting for us to compare the prices of 'tourist' things. We've seen a bit of an increase in accommodation, which we've paid for up front, plus the cottages have all tacked on a heating cost. We've travelled in Oct. before and haven't had to pay that. It's 25 pounds which seems reasonable. Will let you know it if felt any different when we return in our trip report.

Why on earth do you expect recession to mean "higher fuel prices, obviously"?

Recessions dampen demand and therefore tend to stop prices rising. In this case, the pound's value against the dollar is falling more slowly than the dollar price of oil, so fuel prices in sterling ought to be falling. <b> Which they are </b>

There's not a shred of evidence that &quot;motorists are cutting down on unnecessary journeys&quot;: research shows there's no such thing as a journey its maker thinks is unnecessary, and car mileage is still growing.

Food price rises (nothing to do with a recession, BTW) struggle with some restaurants' urge to price-cut to promote business, so the net effect's a standoff. There's a slight growth in restaurants' promotional offers. But the overall effect on the tourist industry is patchy: fewer people are travelling long distances on holiday (Britons spent $12 BILLION more in North America lasdt year than North Americans spent here), so there's some growth in some bits of domestic tourism.

Net, net: apart from more &quot;for sale&quot; boards outside houses, you'll see absolutely no evidence of a recession at all.

Not least because there isn't one. Yet. Recession technically means a reduction in gdp for two successive quarters. Since Britain's gdp has shrunk in just one month in the past 16 years, it can't be in recession till December.

I read somewhere that people are cutting down on purchases apart from eating out and buying shoes ;-)

<i>Why on earth do you expect recession to mean &quot;higher fuel prices, obviously&quot;?</i>

Yep. The increases in food and fuel prices are likely more the result of the declining value of the pound, as anything. I would suspect the decline versus the Euro is hitting especially hard.

However, I think there is more to the recession fears than you give credit for. The biggest issue, I think, will end up being income growth. I've seen inflation numbers in the 4% range for the UK. I seriously doubt that, in a recessionary environment, the average UK worker will see 4% income growth.

<i>(Britons spent $12 BILLION more in North America lasdt year than North Americans spent here)</i>

Got a link for that? I'd like to read up on the figures.

We're getting into the technicalities of economic statistics vs. personal perceptions.

A recession, as flanner says, is normally a term applied to the national statistics for the measured economy as a whole. That can be very different from the perceived experiences of lots of different people in different situations. If you've stretched everything to get a 100+% mortgage on a rate that was fixed for a period and is now variable, just when you were thinking you need to move, then you'd be sweating at night; likewise if you've been living the life of Riley on credit cards and only paying the minimum each month; or if you're on a smallish income anyway. But that isn't everybody.

So would inflation be the better word?

<i>So would inflation be the better word?</i>

It is a bit of both, right now. Inflation across Europe is in the 4% range, last I checked. Food price inflation, though, has been even higher. While 4% isn't Zimbabwe levels, it is enough that people notice.

But, the UK, if not in a recession, is certainly in a period of zero to minimal growth. Again, probably not mass layoffs bad, but the bleak picture might be enough to constrain both job creation and wage growth.

The picture is no better in the rest of Europe. The EC, in addition to forecasting a recession in the 2nd half for the UK, also forsees a recession in Spain and Germany, and zero growth across the Euro zone. And they raised their inflation forecast to 3.6% for the year.

http://www.bloomberg.com/apps/news?p...p;refer=europe

Outside the Euro-zone, Denmark was the first European country to see a recession, in Q1 (though it posted growth in Q2). And economic growth across the Nordic region is slowed.

Purely selfishly, a recession is good news. As a public sector employee I have job security and my income won't suffer. So lower prices etc are all good news for me.

It also makes the liklihood of getting rid of this awful government much higher.

TG notes,

&gt; Inflation across Europe is in the 4% range.....But, the UK, if not in a recession, is certainly in a period of zero to minimal growth. &lt;

Here comes &quot;stagflation&quot; again.

Have the economists figured out what to do about it?

We &quot;solved&quot; the problem here by a sharp rise in interest rates. It stopped inflation, but caused a recession.

((I))

My perceptions... I'm spending about 20% more on food than I was a year ago. Petrol has gone up about 10% on what it's been for most of the last few years (the media seemed to be predicting the imminent &pound;1 litre with monotonous regularity for years), but as others say it's down on what it was a month or two ago. We drove from Edinburgh to Pembroke &amp; back last week &amp; the roads were surprisingly quiet, but I put that down to the crap weather. Edinburgh has seemed no less busy than ever, including over the Festival period - *despite* the crap weather. People are generally not moving house unless they have to, so property is sometimes taking longer to sell. Working in banking, jobs are being shed (though no forced redundancies yet) and - the worst aspect for me - not much prospect for a bonus (aka holiday money) next year :-(