Duncan’s Economic Blog

Q4 GDP – Falling household incomes, a rising corporate surplus and a decline in confidence

Posted in Uncategorized by duncanseconomicblog on March 29, 2011

Today we have the third estimate of Q4 growth for 2010, the headline figure is minor upwards revision from -0.6% to -0.5%. But underneath that are three worrying trends.

Disposable income.

“The fall of real household disposable income between 2009 and 2010 marked the first annual fall in real household disposable income levels since 1981”.

This speaks for itself – the first fall in real household disposable income in my lifetime (being a 1982 birth).

Corporate Surplus/Lack of Investment

“[Private non-financial corporations] Net lending was £22.9 billion in 2010 quarter four, following net lending of £15.6 billion in the previous quarter. For the year 2010, private non-financial corporations net lending was £70.9 billion compared with £56.7 billion in 2009.”

In other words the ‘corporate surplus’ of profits over investment rose further in 2010. Businesses are still not investing.


“Real household spending and fixed investment growth both fell in quarter four, which may reflect weakness in business and consumer confidence and a moderation in the growth of real household disposable income.”

The sentence above really gets to the root of the problems – falling disposable income and a rising corporate surplus combined with falling confidence at the end of the year led to a fall in both household spending and investment.

Tackling falling incomes and unlocking the corporate surplus are the only way to generate sustainable growth in the medium term. The budget offered little on either front.


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