UK growth

The UK economy has been receiving a number of plaudits for its economic growth.  Initial estimates for growth in the first quarter came in at 0.8%, or 3.2% annualised.  But there are growing concerns over debt, the housing market, real wage growth and income inequality and weakness in fixed capital investment and a tail off in export led growth.

Much of recent growth has been ascribed to an increase in consumer debt and housing market activity, and we can see that there has been a notable increase in secured lending:

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We must also realise that the UK is still to recover its previous economic high set before the financial crisis:

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Part of the problem, as with the US, has been weak real wage growth:

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And on a longer term view:

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And, again, part of the problem as with the US is the sustained increase in part time work versus full time work, impacting final demand in the economy:

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While participation rates for women has improved over time, this has been at the expense of men:

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But the gender pay gap favours men over women except at the part time level:

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And the dominance of service sector employment and output in the recovery is also a concern given the lower wage growth of the service sector post the financial crisis (graph taken from the ONS website):

Figure 12: Employment and real wage growth in the services and manufacturing industries, Q1 2001 to Q2 2013

Weakness in final demand dynamics is evidenced in the following chart and it is plausible that given still very high debt levels and weak wage dynamics that household consumption will act as a drag on growth going forward:

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And fixed capital formation remains weak:

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And while exports remain an increasingly important part of the recovery:

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Goods exports (and imports) are weakening:

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Some references:

https://research.stlouisfed.org/fred2/series/GBRLFPRNA

http://blogs.telegraph.co.uk/finance/jeremywarner/100025567/the-mystery-of-labour-market-participation/

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/april-2014/statistical-bulletin.html#tab-Average-Weekly-Earnings

http://www.theguardian.com/environment/earth-insight/2014/may/01/treasury-economy-recovery-hype-growth-osborne-crash-risk

http://online.wsj.com/news/articles/SB10001424052702303603904579490903741223392

http://uk.reuters.com/article/2014/04/09/us-britain-trade-idUKKBN0CV0CQ20140409

http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/april-2014/statistical-bulletin.html#tab-Historical-Context

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