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".

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".

Recommended

What is inflation and how will it affect you?
Inflation

What is inflation and how will it affect you?

There has been much talk of inflation recently. But what exactly is it and what does it mean for our money?
24 Mar 2023
Bank of England hikes key interest rate to 4.25%
UK Economy

Bank of England hikes key interest rate to 4.25%

The Bank of England raised rates by 0.25% following a surprise jump in inflation.
23 Mar 2023
When will interest rates go up?
UK Economy

When will interest rates go up?

The Bank of England raised rates to 4.25%, its 11th consecutive increase. Does the base rate have further to go?
23 Mar 2023
Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023

Most Popular

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

Ofgem’s price cap is now predicted to fall below £2,000, based on average typical use, from July, for the first time since 2022. We have all the detai…
21 Mar 2023
Government plans could see NS&I boost interest rates
Savings

Government plans could see NS&I boost interest rates

The government-backed bank has a new funding target, which could prompt it to boost the rates on its Premium Bonds, ISAs and bonds.
16 Mar 2023
Where will house prices go in 2023?
House prices

Where will house prices go in 2023?

We explore what could happen to house prices in 2023 as the market continues to slow down.
24 Mar 2023