Advertisement

Britain's economic bright spot amid global gloom

While the International Monetary Fund points to a bad year for global growth, Britain's economy picks up speed.

15-10-8-OX-St-634
Britain is going shopping

The International Monetary Fund (IMF) thinks that this year we are in for the slowest global growth since the crisis. The second of its biannual forecasts has pencilled in a 3.1% increase in world GDP for 2015, down from a 3.3% estimate in July. The main culprit is the downturn in emerging markets, whose growth will slide for the fifth year in a row amid China's slowdown and reduced demand for commodities. Britain is a bright spot, however. The IMF expects "continued steady growth" here, with output growing by 2.5%, up slightly from the July forecast.

What the commentators said

For now, however, the backdrop is certainly deteriorating, said Warner. China may be heading for a hard landing; "the eurozone is still a hopeless wreck", and America appears to be coming off the boil, postponing the first interest-rate hike in nearly a decade. Global headwinds could knock Chancellor George Osborne's growth and fiscal projections off course again. We can't permanently shrug off the poor external environment, "unsustainably pumping up demand with monetary stimulus" to make up for "the lack of it elsewhere".

Advertisement - Article continues below

Yet the UK isn't merely relying on cheap money, said Capital Economics. There is plenty of organic momentum. Consumers' real incomes are rising strongly, with inflation at zero and wage growth at almost 3% on an annual basis the fastest rise in six years. Consumer confidence is at levels consistent with annual growth in retail sales volumes of around 6%. Household spending comprises around 60% of GDP.

Business confidence is healthy and productivity at long last seems to have started to recover. Industrial production was strong last month. The pace of growth may ease in the third quarter, but "we are still feeling pretty good about the outlook". There are certainly "no obvious reasons why the economy should be seeing a sustained slowdown".

Advertisement
Advertisement

Recommended

Beyond the Brexit talk, the British economy isn’t doing too badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019
The truth about Boris Johnson’s “New Deal” package of infrastructure spending
UK Economy

The truth about Boris Johnson’s “New Deal” package of infrastructure spending

The prime minister promised a package of Rooseveltian proportions to grow the economy out of its Covid-19-induced torpor. Just how impressive is it re…
11 Jul 2020
The charts that matter: gold hits a fresh eight-year high
Global Economy

The charts that matter: gold hits a fresh eight-year high

As gold heads for new all-time highs, John Stepek looks at how that's affecting the other charts that matter most to the global economy.
11 Jul 2020
Quiz of the week 4 – 10 July
Global Economy

Quiz of the week 4 – 10 July

Test your recollection of the events of the last seven days with MoneyWeek's quiz of the week.
10 Jul 2020

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Three ideas for Lloyds Bank's new boss
UK stockmarkets

Three ideas for Lloyds Bank's new boss

The Black Horse needs whipping into shape. A change at the top provides a great opportunity, says Matthew Lynn.
12 Jul 2020
Why the moving average is my favourite charting tool
Sponsored

Why the moving average is my favourite charting tool

Traders and technical analysts use "moving averages" to iron out daily fluctuations and give a much clearer picture of a market's direction. Dominic …
13 Jul 2020