The economic recovery of the United Kingdom during the first half of 2014

Market Update

The economic growth of a country comprises of a large number of different factors and a combined effect of all the factors makes the final impact. Similarly, in order to understand the economic growth of United Kingdom, it is important to identify the performance of various factors regarding the economy such as unemployment, investments, gross domestic product, inflation, productivity, consumption and many more.

Overall, it has been observed that the economic factors have been moving in a strong and positive direction for the economic conditions of the United Kingdom, with the United Kingdom economy starting to flourish once again and recovering from recession. According to a recent report from the Bank of England, the strong performance of United Kingdom’s economy has proceeded. The results for the first quarter of the year show an increase of 0.8% economic growth with production increasing drastically, unemployment falling further and inflation nearing the 2% target.

The United Kingdom’s production is assessed to have grown by 3.1% up to the first quarter of 2014, with a few pointers indicating significantly stronger growth. The Purchasing Managers Index survey has pointed out that the manufacturing sector has started to flourish with the manufacturing output increasing for continuously over a year now, according to Markit. This increase has led to the creation of jobs at a speedy rate in the manufacturing sector for over three years now.

Employment has also increased rapidly. The labour source survey shows the unemployment rate falling beneath the Marginal Propensity to Consume 7% threshold in February. This is now considered to be the lowest recorded in the period of the previous five years. As a result, Goldman Sachs has predicted a fall in unemployment from 6.8 to 6.5% for the current year.

Goldman Sachs has predicted a fall in the Consumer Price Index inflation forecast for the current year from 1.7% to 1.5 %.

Housing market restoration is in process with transactions up by a third over the previous year. Housing costs are up around 10% higher broadly underpinned by strong growth in housing investment.

Having been exceptionally frail over the last three years, private sector pay growth has started to grow, in spite of the fact that it stays well beneath the predicted standards.

Lastly, Sterling has reached its highest level against the United States dollar in the six year period at , with 10% appreciation over the previous year.

The economy of United Kingdom has done exceptionally well in the first half of 2014. As a result of which even the analysts at Goldman Sachs have upgraded the United Kingdom economic growth forecast. Analysts have now predicted that Gross Domestic Product will grow by 3.4% this year instead of 3%.

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