The document provides an overview of recent economic developments in the UK economy across multiple sectors. It summarizes growth trends, output gaps, aggregate demand drivers, inflation, trade balances, fiscal policy challenges and productivity puzzles. Key highlights are the weak recovery since the recession, falling trend growth, high trade deficits, fiscal austerity measures, and slow productivity growth despite low interest rates and borrowing costs.

1. Developments in the UK
Economy
Geoff Riley – Autumn 2013

2. Growth and inflation in the UK Economy

3. Real GDP for the UK

4. Growth and the Output Gap
PLOG - a persistent large
output gap

5. Output gap and unemployment

6. Aggregate Demand (AD)

7. Trying to achieve macro stability

8. Another look at the cycle
New normal growth rate
likely to be slow .............

9. Tracking output by sector

10. The employment rate remains below peak
levels

11. Trend growth is falling – why?
Recession may have inflicted
damage on trend growth

12. The output gap is negative
Plenty of spare capacity
No change in policy base
rates for nearly 4 years

13. Household demand is main
short term driver of AD

14. Average UK House Prices

15. Housing affordability

16. Construction and Jobs

17. Consumer Borrowing Secured on Property

18. Real House Prices

19. Consumer confidence remains weak

20. State of the Economy

21. Low wage growth and the squeeze on real
incomes continues

22. Spending on consumer durables

24. Jobs and prices

25. Oil prices affect AD and SRAS
The external
environment
matters a lot
for the UK
economy
World oil price seems to
have stabilised around
$100 a barrel................

26. Deep recession (> 6% fall in
output) and weak recovery
(GDP grew only 0.7% in 2011)
Economy needs
to grow at least
2% for
unemployment
to start falling

27. Unfilled job vacancies

28. Monthly level of redundancies

29. Regional Unemployment Rates

30. Employment in two key industries

31. Duration of unemployment

32. Youth unemployment in
Greece and Spain is over
50% of the labour force

33. Long term youth unemployment

34. Unemployment and Trend Growth (UK)

35. Euro Zone Jobs Crisis

36. Base Interest Rates

37. Forward Guidance Arrives!

38. The Cost of Credit
Official interest rates are about as low as
they can go and government bond yields
are at record lows. Yet regular borrowers
are paying well above these rates

39. Bank lending

40. Mortgage approvals

41. Sterling exchange rate index

42. Trade balance has been
negative since 1997, mainly as
the result of a chronic deficit
in goods trade
Depreciation of
sterling from 2007
to 2009

43. High trade surplus in services
Trade deficit in goods now over £100bn

44. Key services:
Business services
Financial services
Transport and tourism
Education and Health
Creative industries
Research and development
Key goods:
Manufactured goods
Oil / gas / minerals
Food and drink
Components
Services
UK is the largest service
exporter in the EU

45. UK Balance of Trade in Oil

46. Trade Balance in Gas

47. Trade balance in finished manufactured
The structural trade deficit in
manufactured goods seems to
have stabilised but why is the UK
such a large net importer of
manufactured products?

48. UK – EU27 Trade Balance

49. UK – India Trade

50. UK China Trade

51. Exports and Imports as Share of GDP

52. FDI into the UK Economy

53. Fiscal Policy
The big issue in fiscal
policy is fiscal austerity –
i.e. Cutting the budget
deficit through spending
cuts and tax rises G>T =
budget
deficit

54. How much borrowing can the UK take?
Fiscal austerity as Coalition aims to cut the
size of the budget deficit over the next five
years – will the pain work?

55. The UK government can borrow money for
10 years at cheap interest rates (around
2%) – whereas the cost of borrowing for
other countries is significantly higher – this
gives the UK an advantage – has it been
used well?

56. Interest on UK Government Debt

57. Government spending

58. The squeeze on public sector jobs

59. BRICs growth

61. Productivity in the UK
One of the puzzles of the
period since the recession
came to an end – why has
labour productivity grown so
slowly?

62. More great study resources from
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