Update on the UK Economy

The last of our nine live Easter online revision sessions is today at 12 noon. We will be covering the UK economy with loads of application and evaluation to support students as the May and June papers come into view. Congratulations to the many hundreds of students who have come to every session over the holidays and contributed superbly to the group discussion.

All of the livestreams can be accessed here.

And a full archive of previous sessions is available here

UK economy flatlines

Yesterday's big data drop was the GDP figure for February, with the ONS data revealing that the UK economy failed to grow, although a relatively strong performance by construction and retail meant that at least the economy didn't shrink.

The Chancellor seems relatively optimistic!

Overall, the data suggests that the last quarter has seen the economy grow by 0.1%, with strike action the major headwind, and Britain's performance is lagging behind our trade partners.

US inflation dropping sharply

US inflation has dropped to 5%, its lowest since 2021, as the US economy shows signs of recovering quicker than ours. That said core inflation remains stubbornly high, and this means that the Federal Reserve is likely to continue its hawkish stance for inflation.

Read: US inflation at 5%, the lowest it has been since 2021

IMF releases latest forecast

The UK is forecast to be the worst performing economy, both in the G7 and the larger G20 group of nations in 2023, with the IMF predicting that the economy is going to shrink by 0.3%, before growing by 1% next year. The reasons for this country-specific poor performance include its exposure to high gas prices, high interest rates and its relatively poor trade performance.

Of course, this is only a forecast, but watch for the response to this: no doubt the government will suggest that the IMF has been notoriously inaccurate in the past.

UK to be one of worst performing economies this year, predicts IMF

The IMF are of the view that as inflation falls back, economies are likely to see interest rates decline back to pre-pandemic levels, provided that policymakers keep debt in order.

This isn't really news - it seems to be inevitable - however, some of the reasoning about the longer-term influences that are going to drive interest rates are interesting: ongoing issues with low productivity and the macroeconomic effects of an ageing population are especially singled out

Interest rates likely to fall to pre-Covid levels, IMF predicts