The UK economy [December 2003]

The situation in the world economy is slightly more promising since the last quarter although the short-run prospects for the Euro Area have worsened marginally. The US and the Far East drive growth and trade respectively. China in particular is experiencing strong growth. Japan has performed above expectations. Interest rates remain low and there are few significant inflationary worries. The UK labour market remains buoyant with a steadily rising employment rate and low unemployment. UK real GDP growth is forecast to be 2.0 per cent in 2003, up from 1.7 per cent in the previous quarter. The forecast
for 2004 is 2.6 per cent, again revised up from 2.3 per cent in the last quarter. Consumption and government spending remain the main components of demand but as the recovery sets in we expect investment to become more important. As previously forecast unemployment is expected to remain at low levels with steady employment growth during the year. The outlook for the UK economy is good.