The world is splattered with the word ‘growth’ these days. Journalists, politicians, economists, authoritarians, they’re all saying it. This growth and that growth and, of course, annual adjusted normalised existential growth. Yet nowhere have I heard anyone ask what the word growth actually means in the context of the UK economy and indeed the wider global markets.

Let’s break it down.  Growth is a positive word. To make it negative you have to either change it to ‘shrinkage’ or ‘contraction’ or add the word ‘negative.’  But then it’s not a word, it’s a phrase. So growth is good sometimes, but it’s also bad even though it’s a positive word.

UK growth is good. The UK’s GDP is up 0.5%. Chinese growth is bad. Its GDP is up 6.9%. What’s going on?!

What really matters to market followers is how these things affect the markets. The thing is that the markets expected the UK figure to be pretty much what it is, while they expected the Chinese figure to be at least 300%* while they also didn’t even believe the 6.9% figure, which was probably cooked.  What does this mean for the UK then? To find out, you have to look at it from two perspectives: the stock markets and the economy – the two are separate, yet intimately related.

If you look at the UK 100 , you’ll notice it’s been in a downtrend since April 2015. That’s because it’s full of big corporations. Some of those, like the banks, have been subject to so much regulatory brutality of late that they’re not turning a profit anymore. Some, like the miners and luxury goods guys, decided a while back that the weird fledgling commu-capitalist economy of China was where the future lay.

A lot of Northerners and Welshmen did very well in the UK’s industrial revolution after all, and with China being a lot bigger than the UK (let alone The North and Wales), it looked like the industrial revolution cubed! ‘Let’s get digging!’ said the miners, ‘if we put all our efforts into this, we can’t lose.’ The miners were absent from Investing 101, lesson one, where to put all your eggs.

Others still, like the oil companies, thought that our loyal yet occasionally medieval allies the Saudis would carry on artificially supporting the oil price in between chopping people’s heads off. That was until the Saudis pulled the plug on oil and switched to just chopping people’s heads off. Investing 101.

But it’s not all bad because China, apart from being miles away, is still huge. In absolute terms, demand has never been higher for raw materials there, but the fact that it’s also transitioning – just like the UK did in the 1980s when Thatcher waged war on the miners (déjà vu, anyone?) – will mean a resizing of the commodities sector. But while that’s bad for the UK 100 , it doesn’t affect the UK economy. If anything, right now, the UK is in a winning position. In particular, low oil prices are fantastic for net importers like the UK.

Indeed, if you were to broaden your horizons a little and look at the , you’d find an altogether friendlier bunch that generate most or all of their revenue right here in the UK economy.  And they had sterling 2015 – the rose 8% compared to the UK 100 ’s dire 5% decline.

The UK 100 does not reflect UK economic growth because virtually none of the companies therein are UK-focussed. The blue chip index is highly exposed to the bad growth of China rather than the good growth of the UK. Don’t be spooked by dark headlines in the mainstream press – if you look carefully in the comment sections, you’ll be sure to see much more about what’s really going on. That’s getting truer every day.

*figure exaggerated for comedic value.

Augustin Eden, Research Analyst, 28 Jan