A day of good news for the Government: GDP, unemployment and trade – all on the up

Joe Wright, 22 January 2014

There are a number of positive signs for the UK economy this week. The first is GDP growth, which is now forecast by the IMF to reach 2.4% in 2014 and 2.2% in 2015, indicating a renewed momentum from the dreary 0.3% seen in 2012 and 1.7% in 2013. The UK is now set to be the fastest growing advanced economy in the coming years – though these are forecasts and the competition is hardly tight, the Euro Area is predicted to grow at 1% in 2014 and 1.4% in 2015.

The second bit of good news is that the ONS, just this morning, has reported a huge drop in unemployment. From September to November of last year, the unemployment rate fell by 0.5%. It now stands at 7.1%, 0.6% down on the previous year, and with some significant drops in regions with the highest unemployment rates: Yorkshire and Humberside fell from 8.8 to 8.4% in the months September to November (though the highest, the North East, saw no change, remaining at 10.3%).

But there are still some problems. As the IMF noted, and Duncan Weldon of the TUC elaborated on, the nature of the UK’s growth is still cause for concern: ‘the United Kingdom has been buoyed by easier credit conditions and increased confidence. Growth is expected to average 2¼ percent in 2014–15, but economic slack will remain high.’ According to Weldon, and many others, it is still a recovery ‘associated with easier credit and increased confidence – essentially a rise in household debt/a decrease in household savings’. This much is hard to defend against. Household debt reached a record high last year and has doubled in the last decade. Britain’s trade deficit has also reached record proportions.

Part of that is still the fault (as far as fault can be placed) of the Eurozone. The 1% forecasted growth from the IMF means it is unlikely that one of the UK’s biggest markets will pick up anytime soon. But the third bit of good news is that the to-ing and fro-ing of Britain’s political top guns to China seems to be paying some dividends in respect to trade. According to the BBC this morning, trade between the UK and China is at a ‘record’ high. 2011 saw the first trade deficit reduction with China since 1998, and it is continuing to decline. Gaining a foot in China’s domestic market bodes well for British production, especially as Chinese wages and the renminbi climb in value.