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The UK and World Economy Summer 2018

The UK economy is in reasonable shape at present, but there are signs of challenges ahead for the world and for the UK, argues Stephen Davies.

At this moment, the situation for both the world economy and the UK economy looks as good as it has done for quite some time. From about the autumn of 2017 concerns and worries in political and financial circles started to shift, away from wondering why the pace of recovery from recession was so slow, and whether the world would ever return to stable growth, to fretting about the problems of success such as the return to a historically normal level of interest rates and the unwinding of quantitative easing (QE). There are good reasons for this shift in sentiment but also reasons for not being quite ready to put out the bunting yet.

Where the UK economy is concerned, it makes sense to look at the whole of the last two years to get an idea of where things stand, rather than looking simply at the previous year or (even worse) just a couple of quarters. If we look at the ONS figures for GDP growth in 2016 and 2017, they look like this: in 2016, the four quarters showed growth of 0.2%, 0.5%, 0.5%, and 0.7%, making a full year total of 1.9% growth. In 2017, we had 0.2%, 0.3%, 0.5%, and 0.4%, making a total of 1.7%.

A rosier picture

The full-year figures suggest a falling rate of growth but the quarterly breakdown gives a rosier picture. The wide expectation was that Brexit would lead to a sharp decline in growth, or even a recession. Clearly the latter did not happen and the immediate aftermath of the Brexit vote actually saw a much stronger performance.

This is an extract from an article in The UK Economy special report, June 2018.

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