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Osborne and Clegg clashover way to fix economy
GEORGE Osborne yesterday rejecteda call from the InternationalMonetary Fund’s chief economist toadopt a less aggressive stance on cut-ting the UK’s deficit. The IMF’s Daniel Blanchet suggest-ed this year’s Budget, due in March,“would be a good time to take stock and make changes to the austerity plan” and “slower fiscal consolida-tion” may be appropriate.But the chancellor, speaking at the World Economic Forum in Davos,rejected the proposal, saying any reduction in spending cuts wouldrisk Britain’s economic credibility.“That credibility is very hard wonand easily lost and I think it would be a huge mistake to put that atrisk,” Osborne told an audience inthe Swiss alps.Osborne’s views appeared to contra-dict those of deputy Prime MinisterNick Clegg, set out in an interview yesterday where he seemed to regretthe extent of the cuts to capitalexpenditure under the coalition.“If I’m going to be sort of self-criti-cal, there was this reduction in capi-tal spending when we came into thecoalition government. I think wecomforted ourselves at the time thatit was actually no more than what[former chancellor] Alistair Darlingspelt out anyway, so in a sense every-
Fears over ECB funding scheme
Concern is mounting among seniorbankers that the European Central Bank’sspecial longer-term funding scheme risksbackfiring, stigmatising the region’sweaker banks a year after it was launched.From the end of January banks have theopportunity to start paying back thecheap three-year money they borrowedunder the ECB’s longer-term refinancingoperation. Bankers fear the earlyrepayment window will hasten the adventof a two-tier banking market in theregion.
Ikea founder questions expansion
Conflict appears to be brewing at the topof Ikea after the founder of the flat-packfurniture retailer expressed surprise overmanagement’s plans to double the paceof store openings.
EU carbon prices crash to record low
The world’s biggest carbon market wasleft in disarray on Thursday, with pricesbriefly crashing almost 40 per cent in amatter of minutes, after Europeanpoliticians rejected a plan to prop upprices.
Moët billionaire boss moves
The richest man in France Bernard Arnaulthas transferred his multibillion-eurofortune to Belgium. Aides said he hadmade the move not for tax reasons but toensure LVMH remained in the family whenhe died.
Timpson cobbles Snappy Snaps deal
The family behind Timpson is diversifyingfrom shoe repairs into passport picturesthrough a deal to take over Snappy Snapsfor a price of between £2m and £3m.
Boris: Junk rhetoric of austerity
Boris Johnson is to demand government“junks the rhetoric of austerity” and backsmulti-billion pound investments inhousing and transport. The Mayor willoutline a plan to leaders in Davos.
BoA issues bond crash Fed alert
The return of confidence and healthygrowth in the US risks setting off a “bondcrash” comparable to 1994 and triggeringa string of upsets across the world, Bankof America has warned.
Toyota, BMW to share technology
Toyota and BMW said they will expand atechnology-sharing pact, the latest signof a deepening partnership. Toyota willprovide BMW with technical know-howfor fuel-cell vehicles.
Citi to pull SAC Capital investment
Citigroup’s private bank has decided topull its $187m investment from SACCapital, the latest client defections amidscrutiny of the hedge-fund firm.
THE size of the Federal Reserve’s balance sheet reached a record,Fed data released yesterday showed, due to the central bank’spurchases of Treasuries andmortgage-backed securities thatare part of its unconventionalpolicy aimed at supportingeconomic growth.The Federal Reserve’s balancesheet –which is a broad gauge of its lending to the financialsystem –stood at $2.994 trillion(£1.897 trillion) on 23 January, upfrom $2.946 trillion on 16 January.
Fed data showsrecord balance
George Osborne said his austerity plans were keeping state borrowing costs low
BY CITY A.M. REPORTER
SOCIAL network Twitter, thesocial network known for its 140-character messages, hinted at thedirection of its evolution yesterday with the launch of a newstreaming video service forsmartphones.The service, called Vine, recordssix-second-long video clips, whichcan then be seamlessly embedded within tweets.Privately held Twitter isexpected by analysts to go public within two years.
Twitter rolls outvideo function
BY CITY A.M. REPORTERBY JAMES WATERSON
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ODAY is GDP day, when theOffice for National Statisticsreleases its first, early and ultra-preliminary estimate of thegrowth of the UK economy. As ever,the media, the markets and thepolitical classes will massively over-react to whatever gross domesticproduct (GDP) number is released,good or bad. I would urge everybody not to pay too much attention.It is clear that the UK is performingpoorly, with real wages falling, retailsales stagnating and the budgetdeficit increasing again. But it is hardto accurately measure the size of theoverall economy and GDP figures arenot only spuriously accurate but alsosubject to shockingly large revisions. Vital research by Sam Williamson of the University of Illinois, published oneconobrowser.com, shows that theextent of these revisions can be
Why you should take economic statistics with a bucket of salt
FRIDAY 25 JANUARY 2013
extraordinarily significant.Until about 18 months ago, theOffice for National Statistics (ONS)thought UK GDP (in real terms, meas-ured in 2009 prices) had grown by 2.43 per cent per year over the past 62 years. Per person, GDP had grown by 2.06 per cent a year, from £6,428 in1948 to £22,410 in 2010. Then camethe Blue Book 2011 and 2012, the key annual documents about the econo-my, and everything changed, thanksseemingly to a decision to use a differ-ent measure of inflation. The ONS now believes the economy has been growing by 2.68 per cent a year over the past 62 years – muchfaster. GDP per person is now deemedto have grown by 2.31 per cent a year,from £5,559 in 1948 to £22,920 in2010. Our statistical masters havedecreed that the economy was actual-ly 14 per cent smaller than previously thought in 1948 – astonishingly, fig-ures first out more than six decadesago are still being revised, which sug-gests that today’s data will probably look very different by 2075. There are numerous other almostunbelievable changes. The biggestrevisions are to our performance inthe 1950s (up almost 0.4 per cent a year) but every decade has beenimproved, at the stroke of a statisti-cian’s pen. Thousands of economicstudies, including hugely importantsupposed quality improvements inthe public sector (such as better A-Level grades) started to be treated asincreased output. Then there are allthe short-term changes, the endlessrevisions going back a few years thatsometimes turn what we thought wasa terrible, negative quarter into a pos-itive one. The inevitable problem isthat the ONS relies heavily on surveysof the activity of existing firms, thusmissing some new ones. The fact that statisticians can simply rewrite the past is deeply depressing; what seems like objective reality is infact little more than a social con-struct (as an over-caffeinated Frenchphilosopher might put it). The econo-my is doing poorly – but don’t taketoday’s figures too seriously. work, have become worthless –assuming, of course that the new data is more accurate than the old.Either way, it’s a disaster for ourunderstanding of economic history. The new numbers suggest the econ-omy grew by 3.03 per cent a year inthe 1950s, peaking at 3.18 per cent a year in the 1960s before slowing to2.07 per cent in the 1970s, accelerat-ing back to 3.09 per cent in the 1980s, before expanding by 2.77 per cent inthe 1990s and by a miserable 1.77 percent in the 2000s, the worst of thepost-war decades. These figures would be fascinating if they hadn’t emergedfrom such a breathtaking re-rewrit-ing of history.Over the past decade, I have wit-nessed and written about other suchmassive revisions. There were hugechanges when new Europeanaccounts were introduced and when body was predicting a significant dropoff in capital investment.”Clegg added: “But I think we’ve allrealised that you actually need, inorder to foster a recovery, to try andmobilise as much public and privatecapital into infrastructure as possible,”Clegg told The House magazine.Meanwhile Angela Merkel told theDavos conference that European lead-ers must keep down the cost of labourto ensure the EU remains competitive,adding that fiscal consolidation andgrowth “are two sides of the samecoin.” The German chancellor also declinedto criticise David Cameron’s decisionto call for a referendum on Britain’scontinued membership of the EU andthe two leaders held private discus-sions yesterday afternoon. The Prime Minister used his speechat the conference to repeat his attackson tax avoidance. “Companies need to wake up and smell the coffee, becausethe customers who buy from themhave had enough,” he said. “I am a low-tax Conservative. But I’m not a compa-nies-should-pay-no-tax Conservative,”he told business leaders.
The new jobs website for London professionals
WHAT THE OTHER PAPERS SAY THIS MORNING
Pay cut for Morgan Stanley chief
Morgan Stanley chief executiveJames Gorman received lower pay for2012 after profits declined but thebank showed progress in reshaping itsbusinesses. Gorman received $6m(£3.8m) in total compensation for2012, including $800,000 in salary,$2.6m in deferred cash and $2.6m instock options, a person familiar withthe matter said yesterday. He did notreceive a cash bonus. Gorman made$8.56m for 2011.
Samsung posts record profits
Samsung Electronics reported arecord quarterly profit of $8.3bn(£5.3bn) and kept its 2013 investmentplans at the previous year’s level,defying expectations that it mayreduce spending amid weakerdemand for computer chips. TheSouth Korean firm said October toDecember operating profit increased89 per cent from a year ago to 8.84trillion korean won, in line with itsearlier estimate.
Amazon buys voice tech firm
Amazon said yesterday it hadsnapped up text-to-speechtechnology company Ivona Software,a sign that the world’s largest Internetretailer may be looking to developmore services similar to Apple’s Sirivoice-based search product. Ivona’stechnology already supports severalfeatures on Amazon’s Kindle Firetablet computers, such as text-to-speech, said Dave Limp, who overseesthe Kindle business.