Monday 5 June 2017

Winter (recession) is coming

I suspect the UK will get another recession before long, let's say in the next year or two. I'll mention 2 reasons for thinking this; timing and consumer spending/saving.

Cycles
Recessions seem to come round roughly every 9 or 10 years; say 1991, 2000, 2009 ... will the next recession be in 2018? OK, this is a very simplistic approach and the gap between recessions can vary quite a bit. Still it does look like we're approaching the time.

People are overspending
The economy is made of 3 main parts; people, companies and government. For this discussion we're mostly interested in people. A recession happens when people spend less for 6 months or more. This makes companies spend less and employ fewer people and the whole economy gets weaker for a while.

Earlier this year the news came out that the savings ratio was at it's lowest level in over 50 years: 
https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/nrjs


You can see how people have been saving even less than in 2000 and 2007. At some point soon people will decide they can't afford some of those luxuries and they need to save a bit more. And winter will be here again.

One more thing:

General Election
OK, this is maybe a bit cynical, but hey, it involves politicians so I think that's allowed. 

In a few days we're going to have a general election. Now there are various theories about why the Tories have decided to call this election just now ... my guess is they realise another recession is on the way and it's better to get the election out of the way before it instead of after.


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