PProfessor of Economics at Dartmouth College, new Hampshire, USA, and a member of the MPC from June 2006 to may 2009
Office for national statistics confirmed that GDP growth in the UK in the first quarter of 2018 was 0.1%. We have comparable data for 19 other countries of the EU, which – with the exception of Romania grew much faster. Austria grew by 0.7%, Belgium 0.4%, Denmark 0.3%, Finland 1.1%, France 0.3%, Germany 0.3%, Italy 0.3%, the Netherlands 0.5% and Spain 0.7%, many of which also had bad weather.
A major problem is that business investment fell by 0.2% in the last quarter of 2017 and the first quarter. Firms will not invest when they have no idea what form the British exit from the EU will take place and not least what will happen in relation to the Irish border.
We should expect this decline to continue, that would be bad for British productivity. Recall that the French still produce in four days that the UK produces five and it’s not soon to change at any time. The UK continues to be the sick man of Europe.
The UK economy feels the chill from the specter of a disorderly exit from the EU UK
Mark Carney said the UK economy was as much as 2% less than projections for the quarter and the month and estimates of the British household more than £900 worse. Uncertainty about what form the British exit from the EU will also assume that the number will continue to grow.
Added to this, real wages in the UK still 6.5% below where they were in February 2008 when the great recession began. They are the same as they were two years ago, despite a small pick-up recently. Continuing and reckless of cost savings standards of living fell even more – especially at the lower end, due to the reduction of benefits and public services, and especially for those at the low end. People are suffering.
There was steady growth in retail sales in April after the terrible weather has affected the number of March. But the pressure will continue On the high street and it is certainly not good news that marks and Spencer announced plans to close 100 stores. It is likely that other high street closures will follow. All sector PMI index did not pick up – but still was weaker than expected in the markets. Inflation fell significantly below market expectations and housing prices will continue to slow. So a little improvement but not much.
There is nothing in the data suggesting a rate hike appropriate until the may meeting of the monetary policy Committee, and since then the data has deteriorated further. Fortunately, they saw sense and kept the rate at 0.5%. The consequence of this was that the pound fell nearly 6 in relation to the dollar. If all of these data indicate to me the rate reduction is in order and soon. The quarter and month is a disaster. As Laurel and hardy famously said: “Well, here’s another nice mess you gotten me into.”
Senior economic adviser to PwC consulting and a member of the Bank of England’s monetary policy Committee from October 2006 to may 2011
A sample of mixed data for the UK economy continued this month, although it is also clear that bad weather has had a significant deterrent effect on a number of economic indicators for the first quarter of the year.
Even with the weather conditions, nevertheless, the UK continues to fall against its major trading partners. UK GDP is only 1.2% on a year ago, compared with an increase of 2.5% in the Eurozone and an increase of almost 3% in the US. Sluggish growth in consumer spending still remains the major source of weakness on the demand side of the economy.
However, the labor market continues to paint a fairly positive picture, with employment continuing to grow, while wage growth continues to run ahead of inflation. Both of these factors should be positive consumer spending in the second half of this year.
How to vote the UK out of the EU has affected the UK economy? The verdict this month
UK inflation fell in April to 2.4% but the good news on this front should be discontinued in the next few months due to the increase in fuel prices. The price of Brent crude could fall recently returned from its recent peak near $ 75 per barrel, but a year ago prices were in the range of $45-$50.
Also with the pound softening against the dollar in accordance with the decision of the monetary policy Committee not to raise interest rates in may and the resumption of growth in import prices will likely keep inflation at around 2.5% during the summer months.
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The UK economy also continues to suffer from very weak productivity growth. In the United States and the Euro area, GDP will grow by 1% -1.5% faster than employment. In the UK, GDP and employment grow at the same rate, which suggests that the performance is flat and not growing at all.
When leaving the UK the reasons for the high value-added jobs in manufacturing and financial services to exit the UK, productivity growth could further weaken.
The UK economy now seems to be in a protracted phase of disappointing growth, and it may well be that the current policy of keeping interest rates at exceptionally low levels exacerbates the problem, not making it better.