Negotiation, Negotiation, Negotiation

UK Property Investment news and comments from Mark Harrison of YourPropertyExpert.com

The Dr. Who Theory of Recessions

Posted by markharrison on December 23, 2008

Depending on your age, you may believe that Dr. Who is either a trendy young man, who appeared on our screens a couple of years ago… or you may believe that he wears a long flamboyant scarf. (I’m firmly in the latter camp, by the way.)

What you may have missed is that the only person who can say we’re entering a recession in the UK is the good Doctor, because doing so requires the ability to time travel.

This is because, here in the UK, we have a precise definition of what a recession is, and it’s different to the definition they use in the USA. Over in the States, there’s a body called the National Bureau of Economic Research, and part of their job is to say when the US economy enters a recession. They use a broad range of factors, and basically announce what they’ve decided.

Here, however, a recession has a specific meaning – it’s two consecutive quarters of “negative growth” (which sounds like a politician’s way of saying “shrinkage” to me).

Now, back in October, it was announced that Q3-2008 was negative… no surprises to anyone who’d actually lived in the UK during the months of July, August and September.

The question now is whether anyone even vaguely believes that Q4 will turn out positive? I’ve not found anyone making such predictions, by the way.

So, here’s the way the logic works.

In late January, the Office of National Statistics will formally announce the Q4 figures. At that point, it will be announced that we are in a recession…

… but this is where the Doctor comes in. What will actually be announced is that we’ve been in a recession since July.

OK, maybe you don’t have to be a Time Lord to have worked that out by now, but it is one of those odd little quirks of UK life that we won’t “officially know” for another month or so. This is why investors spend so much time trying to work out “forward looking” measures, rather than only looking at out-of-date statistics.

For the record, the first time I used the r-word was on the 22nd January 2008, but that was talking about the US economy, not the UK… but still a good YEAR before the UK Civil Service🙂

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