Today the U.K.'s latest gross domestic product data showed the economy shrunk by 0.4% in the third quarter and by 5.2% over the past year. And while anyone paying attention suspected the numbers were likely to be bad, apparently for many, the news came as a surprise. A note from Goldman Sachs this morning called the sixth straight quarter of economic contraction, and the worst recession since World War II: “Unbelievable. Literally”
This result was wildly at odds with the consensus estimate and the Bank of England's forecast for growth of 0.2%.
See WSJ: The U.K.'s Unbelievable Shrinking Economy
For Prime Minister Gordon Brown the politics of this are a nightmare. The shocking GDP numbers sink his government’s green shoots strategy that they had hoped would lead them with strength into the coming election. It is now even possible that this economic relapse could trigger Brown’s removal, with a cabinet in deep despair and his backbenchers furious over MP expenses.
See WSJ: GDP Numbers sink Gordon Brown's Last Hope.
With so much taxpayer money and political capital now invested in the rebound story, today's miss in the UK must be sending shivers down the spines of many other leaders. I think more disappointments are likely in the months ahead. Politicians from all around the world are becoming increasingly vulnerable to growing civil outrage and unrest. It seems the only job worse than being a bank executive these days is being a politician; but then, at least both still have a steady pay cheque to comfort them.
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