US Should Heed The UK’s Economic Woes

According to the U.K. Office for National Statistics, the U.K. economy contracted by 0.3% in the fourth quarter of 2012. As an observation in the U.K. Telegraph put it, the economy is now on the threshold of an “unprecedented triple-digit recession”.

However, when you think about it, saying that the U.K. faces a triple-digit recession is a bit of misnomer, given that the economy got an Armstrong-esque (i.e. artificial and short-lived) boost from the London Games in the third quarter.

If not for this event, the U.K. economy would likely still be in the midst of a double-dip recession. To this effect, the economy has now contracted in four of the last five quarters and posted 0% growth for the whole of 2012.

Thus, outside of that fleeting pop from hosting the Olympics and Paralympics, the U.K. has now joined the Euro Area (EA17) in not showing any growth in economic output since the third quarter of 2011.

What’s more, in a cautionary tale for the U.S. State Department (apropos its pending decision on the Keystone pipe)… U.K. mining and quarrying output in the fourth quarter (which accounts for more than 15% of the country’s production sector) fell by 10.2% and contributed negative 0.2 percentage points to the 0.3% contraction in GDP. The pullback in this sector was attributed to delays in bringing the Buzzard oil field (the U.K.’s largest in the North Sea) back on stream after fall maintenance.

Here’s hoping State does not delay what should be an obvious call on Keystone.

After all, as illustrated in today’s issue of The Schork Report from the St. Louis Fed highlights, the U.S. economy needs all the help it can get. That is to say, the current economic expansion is the worst in the post-WWII era.

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