Since the fall of 1992, the last recession, the British economy has experienced the longest uninterrupted economic growth since records began in the end. After 3.2% in 2004, strong growth in the year 2005, the economic growth of only 1.6% lower than expected, but the growth rate is expected to attract up to 1.8 in 2006 and 2.4%% in 2007.
Sources (National Bureau of Statistics)
This is the basic functions of economic growth in the UK, we are able to avoidBoom-and-bust cycles, post-war economic characteristics. Since 1992, economic growth, in general, relatively close to the long-term trend growth rate of 2.5%. This increased stability should help to make a long-term investment decisions.
However, the disadvantage of economic growth, many economists believe that this is uneven. The manufacturing sector continued to fulfill the main engine of economic growth in personal consumption frequency. ForFor example, in the late 90s, a sharp increase in the real estate market to stimulate consumer spending. Even if the interest rate 4.5% (who in 1991 reached 15%) of consumers are demanding to do more. This has led to a decline in the savings rate in 2000, a record 4.0% lower (12% to 1980). Since 2000, the savings rate has rebounded to 4.7%, but still low, credit card spending hit record levels. This means that the British economy will be very sensitive toTo raise interest rates, took place in the next 24 months.
Unemployment
Since 1992, the unemployment rate fell, the claimant reached more than 300 million unemployed. However, in an unprecedented low in 2004, the unemployment rate began to gradually increase. Office for National Statistics (ONS)'s office said the number of people losing their jobs by 72,000 people in 3 months to 1.49 million, or 4.7%, to October. As the measures are not reliable governmentUnemployment (right grants the right to - the joint security area), an unemployment rate of 902,000 is located in November, for 10 consecutive months, the company has increased. Even more alarming is the increase in the number of high economic activity. This is the pressure on public finances (to pay, access to after-tax proceeds). For the unemployed remains uncertain prospects. When this growth will continue to trend in lost time when other work can be, especially in the beleagued manufacturing.However, if you can not pick up this positive trend of growth came to an end. Many economists believe that the natural rate of unemployment is declining, because of the increase in the UK labor market flexibility and the success of the 20th century provided a 80's and 90's policies. The unemployment rate in the United Kingdom remains relatively positive, such as Germany and France, the EU economies, unemployment has nearly doubled.
Inflation
In the United Kingdom Government's target inflation remains near theDespite the continuing high oil prices. Last year in December, consumer price index has dropped to 2% drop over 3% at the end of 2004. This may mean that further interest rate cut expectations, despite the Monetary Policy Committee is disappointed that business in the Monetary Policy Committee's last meeting on interest rates at 4.5%. In next year's prospects, some analysts are concerned that if Iran's oil supply is greatly reduced () for political reasons, oil prices continued to rise, to 100 U.S. dollars a barrel. TheseLevel, it may be then fed back into the cost-push inflation. But at this stage, this is forecast to remain speculation. There are also many strong downward pressure on the inflation rate, China's price competitiveness, low-wage labor market and moderate housing market.
Public Finance
Despite 15 years of economic growth, the government had to borrow money than expected. Pre-budget report predicted2005 / 6, at £ 37.0 billion euros in net borrowing. (In the current budget deficit recorded a deficit of 400 million euros, in December 2005)
This means that the Government is close to breaking his golden rule of borrowing and the Prime Minister may be forced to increase taxes or cut spending, if not to improve the financial situation. % Of gross domestic product, up to 30% of the public debt from 2001 to 2005 by 37%. However, this was significantly lower than other OECD countries, such as
Germany: 4.2%GDP
France: 4.2% of GDP
United States: 4.9% of gross domestic product
Japan: 7.4% of GDP
(2003 financial year)
http://www.statistics.gov.uk/cci/nugget.asp?id=206
The current account deficit
The current account deficit widened in 2005, the gross domestic product to 3.5% last quarter, partly due to Hurricane Katrina insurance. This is a very long time the largest deficit. In the long run a higher budget deficit may have lower interest rates and growth will be limited, but with theUnited States, Britain has little to extricate themselves from the negative impact of the current account deficit
Conclusion
Are still optimistic, despite a moderate increase in the unemployment rate, the overall prospects for the UK economy. With the background of low inflation, steady economic growth, economic growth is likely to rebound to 2007 to create more employment opportunities. If inflation remains close to the Government's objective is also likely to be a decline in interest ratesGroup. On the other hand, the United Kingdom is mainly due to economic worries, manufacturing and industry generally relatively weak. This makes it difficult to reduce the current account deficit, and may result in further layoffs in some sectors of the economy.
- River Pettinger 13/02/06
See also the British economy in 2007, blog
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