The UK economy [October 2002]

The UK economy is weaker at this time than expected in early summer. As growth in the global economy continues to be weak forecasters have tended to revise down slightly their forecasts for both this year and next. Against this background the inflation picture has improved and the prospect of a rise in interest rates has receded. But the labour market has weakened slightly over the last few months. The net trade position is improving as exports pick up and the growth of domestic consumer demand appears to be moderating slightly. The prospects of a shift to export- led growth as the world economy recovers therefore seem brighter than earlier in the year. Nevertheless, there are considerable uncertainties in the world economy for both real economic as well as political reasons, such as the growing threat of a war with Iraq.