The UK economy [November 2004]

Kenneth Low

Research output: Contribution to journalArticle

Abstract

There remains strong growth in the US, Japan and the Far East despite a significant slowing in China and weaker data from the US. Japan is performing better than expected while the Euro Area is still relatively weak. The Euro Area is however, forecast to pick up in 2005. Inflationary pressures are continuing to build in the world economy principally because of capacity constraints and higher oil prices. The monetary authorities are taking what they believe is the most appropriate response to inflation in the sphere of influence. The Federal Reserve has indicated interest rates will rise further and the ECB are holding interest rates as are the Bank of Japan. The main downside risks are the imbalances in the world economy and the prospect of sustained higher oil prices. Overall the conditions in the world economy remain favourable. UK real GDP growth was only 0.4 per cent in 2004Q3 after growth of 0.7 per cent and 0.9 per cent in the first and second quarters respectfully. This may mean that the upper limit of the Chancellor's forecast of 3.5 per cent for real GDP growth may be unobtainable now. It may be however, that GDP growth of 3.3 per cent could still be achieved in the UK, if this is a temporary phenomenon rather than a sustained slowing of growth. Investment is a more important driver of growth now and both consumption and government spending contribute significantly to domestic demand. There will be a more substantial pick up in trade when the Euro Area recovers more fully. Inflation remains relatively low in the UK economy with CPI inflation of only 1.1 per cent in the 12 months to September. We are still concerned about the current account deficit and PSNB. We will remain at relatively low levels. The outlook for the UK economy is still relatively promising.
LanguageEnglish
Pages17-21
Number of pages5
JournalQuarterly Economic Commentary
Volume29
Issue number3
Publication statusPublished - Nov 2004

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Euro area
GDP growth
World economy
Inflation
Japan
Oil prices
Interest rates
Real GDP
China
Bank of Japan
Imbalance
Capacity constraints
Downside risk
Current account deficit
Domestic demand
Government spending
Federal Reserve
Authority

Keywords

  • UK economic performance
  • UK economic output
  • economic forecasts

Cite this

Low, Kenneth. / The UK economy [November 2004]. In: Quarterly Economic Commentary. 2004 ; Vol. 29, No. 3. pp. 17-21.
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Low, K 2004, 'The UK economy [November 2004]' Quarterly Economic Commentary, vol. 29, no. 3, pp. 17-21.

The UK economy [November 2004]. / Low, Kenneth.

In: Quarterly Economic Commentary, Vol. 29, No. 3, 11.2004, p. 17-21.

Research output: Contribution to journalArticle

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