The UK economy [February 2005]

Growth in the world economy is relatively strong and strong trade growth is forecast. The UK is well placed to enjoy the benefits of trading with the US, expanding new markets in the Far East, especially China, to pick up from the forecast recovery in the Euro Area and to reap rewards from domestic demand. When UK GDP growth for 2004Q3 was recorded as only 0.4 per cent this was unexpected. Fourth quarter growth appears to be much stronger at 0.9 per cent. Employment remains relatively strong while unemployment is low. Inflation is also low and stable despite recent surges in both house price inflation and the oil price. Interest rates appear to have stabilised at 4.75 per cent. Consumption, government spending and investment are the main drivers of UK growth.