Is inflation a threat to the UK recovery?
This week sees a number of vital economic statistics in the UK with concerns that the rate of inflation is set to spike upwards in the early part of 2010. Recent figures have shown an increase in the cost of raw materials, much of which came from the upward movement in the price of oil, which will have an impact upon inflation. So what else do we need to monitor in the short term?
There is also concern that the government's refusal to maintain VAT at 15%, and instead return it to 17.5%, will also place further upward pressure on the cost of living in the UK. In what is becoming a more difficult scenario by the day, the Bank of England is also under pressure because of the strategy regarding UK base rates which have remained at 0.5% for some time. If inflation does begin to take off, and the Bank of England does not respond quickly enough, we could move towards a situation where the rate of inflation spirals out of control and we need to see a significant increase in base rates in a very short space of time.
The ability to increase base rates and make borrowing more expensive is a very basic tool in the economic UK government's toolbox but one which has proven very effective over the years.
How will UK public services fare in the short to medium term?
Even though we may be a number of months away from the next UK general election, the battleground has already been drawn with Labour and the Conservative party at loggerheads over potential public sector service cuts and the impact this will have. Even though the Labour Party had been adamant that no cuts would be forthcoming in the short to medium term, Gordon Brown was this week forced to backtr...Read More
UK recovery could take five years
The Bank of England monetary policy committee has revealed the inner thoughts of committee members with some believing that the UK recovery could take five years to complete. The balance between increasing tax income for the government, in order to pay down borrowings, and allowing businesses and consumers to retain enough money to let the economy grow is a very difficult act in itself.
Expenditure totals worked out by Axa
The amount of money it costs to maintain an average lifestyle has been worked out by Axa, an insurer.According to the firm, today's 18-year-old would spend around £1.75 million across the rest of his or her life.For the average 55-year-old, the total was a still-hefty £624,000.Axa worked out its total spends by monitoring the expenditure habits of 2,100 Britons.The firm also found that the avera...Read More
Is deflation a potential problem for the UK economy?
News that the Japanese economy has again slipped into a deflationary period, albeit "mild" according to the authorities, is an unwelcome reminder that deflation is a potential problem for all economies around the world. So could the UK economy also experience a period of deflation? Depending upon which inflationary measure you use, you could already argue that the UK economy is in a period of d...Read More
UK economic growth revised yet again
Figures from the Office for National Statistics (ONS) show that the UK economy shrank by 0.2% in the third quarter of 2009, with many analysts having forecast zero growth or even positive growth in the UK economy. While the revised figure is better than the initial estimate of a 0.4% reduction and then a second estimate of a 0.3% reduction, there had been hopes that the rebound in the construction...Read More