Economic inactivity – definition and causes

reasons-for-economic-inactivity

Definition: Economic inactivity means that people (aged 16-64) are not involved in the labour market – they are neither working or actively seeking employment. Economic inactivity includes students, early retirees and the long-term sick. There are 8.5 million counted as economically inactive in the UK. The unemployed who are seeking working and willing and able …

Read moreEconomic inactivity – definition and causes

Highest and lowest rates of obesity in the world

obesity-rates-top-25

The highest rates of obesity in the world are found in the small pacific islands,  Nauru, Cook Islands with close to 60% of the adult population meeting definition of obesity as measured by the BMI (body mass index) Excluding these small pacific islands (with very small population) the greatest levels of obesity are found in …

Read moreHighest and lowest rates of obesity in the world

UK Inflation Rate and Graphs

UK cpi-inflation-89-19

Current UK Inflation Rate

  • CPI inflation rate:  1.8% (headline rate) CPI – D7G7 at ONS
  • (page updated 19 Feb 2020)

UK-cpi-inflation-2007-19

Other measures of inflation

  • (CPIH) CPI including owner occupiers’ housing costs – 1.8% (CPIH – L550)
  • RPI – 2.7% (Jan 2020)
  • See: Measures of inflation

Cost-push inflationary factors

In 2017, the UK saw a rise in cost-push inflationary pressures. This caused a spike in inflation, despite relatively weak economic growth. Cost-push inflationary factors have come from:

  • Devaluation in Sterling. This makes imports more expensive and has fed through into higher input prices for manufacturers.
  • Rise in petrol prices in the early part of 2017.
  • Rise in food and recreational goods.

In 2018/19, these cost-push factors have fallen away and weak economic growth has kept inflation below target.

Reasons for low inflation in the UK

  • Low worldwide inflationary expectations. Europe is experiencing very low rates of inflation.
  • Fall in global inflation rates since 2007.
  • Supermarket price wars, with big chains, such as Tesco and Sainsbury attempting to maintain market share from Pound Shops and discounters like Lidl.
  • Weaker commodity price growth.
  • Fiscal austerity – many government departments still seeing spending squeezed. In particular public sector pay restraint of recent years has reduced real wages for public sector workers.
  • Private sector wage growth is still weak. This has limited costs of firms and limited growth in aggregate demand.
  • A potential negative output gap, with real GDP still around 10-15% below pre-crisis trend rate.

Inflation trends in the UK

uk-inflation-1970-19

Despite temporary cost-push inflationary factors in 2017, underlying inflationary pressures remain muted – at least compared to the past four decades.

The current UK inflation rate compares favourably to much of the post-war period.

1970s Inflation

The 1970s frequently saw double-digit inflation. This was due

  • Cost-push factors – rapid rise in oil prices
  • Rising wages due to powerful trade unions trying to keep up with living costs.
  • Lack of independent monetary policy
  • Inflation expectations rose

Late 1980s inflation

The inflation of the late 1980s was due to

  • Rapid economic growth ‘The Lawson Boom‘ – growth was above the trend rate causing supply shortages
  • Rise in house prices fuelling wealth effect
  • Lack of independent monetary policy. Policy was partly set by ‘shadowing the D-Mark’ which led to loose monetary policy in late 1980s

Inflation and wages

  • Real wages = nominal wages – inflation.
  • Usually, during a period of economic growth – wage growth is higher than inflation, this leads to positive real wage growth.
  • During the economic recession of 2009-13 – we had a prolonged period of negative real wage growth. Wages rising at a slower rate than inflation.
  • The end of 2014 saw the first signs of renewed wage growth and positive real wage growth.

UK inflation-wages-2006-19

In 2017/18, the trend of negative real wage growth resumed.

However, since 2018, wages have started to creep up whilst inflation has fallen.

See more at UK wage growth

Inflation since 1990

UK cpi-inflation-89-19

  • Inflation rose over 8% in the late 1980s due to the Lawson boom, which was a period of unsustainable economic growth.
  • Inflation was low in the period 1992 to 2007. This was a period known as the ‘great moderation’
  • The inflation of 2008 and 2012 was due to cost-push factors (devaluation and rising commodity prices)

Read moreUK Inflation Rate and Graphs

Generation rent – definition and causes

home-ownership-by-age-housing-survey-2019

Generation rent is a term to describe those young adults (18-40) who have been priced out of the housing market – unable to buy and having to pay a high percentage of income on rent. As well as an expensive housing market, generation rent faces financial difficulties from high living costs, student loans and low …

Read moreGeneration rent – definition and causes

Reasons for falling UK unemployment

unemployment-total-uk

Despite weak economic growth of the past decade, UK unemployment has fallen quicker than we might expect.  It appears the natural rate of unemployment has fallen and despite record employment levels, wage pressures remain muted. Different reasons for this fall in unemployment include – low productivity, more flexible labour markets, disguised unemployment (underemployment) and growth …

Read moreReasons for falling UK unemployment

Threats to UK economy

real-gdp-uk-2000-2019-actual-real

Since the credit crisis of 2008, the UK economy has experienced structural weakness of Low economic growth Very poor productivity growth Weak demand Unbalanced economy geared towards consumption and low levels of investment. In addition to these structural weaknesses, the UK economy in 2020 now faces real threats from A hard Brexit Risk of slowdown …

Read moreThreats to UK economy

SWOT analysis – Examples

swot analysis

SWOT analysis is looking at a businesses – strengths, weaknesses, opportunities, threats. SWOT analysis is useful for a business looking at strategic planning for the future. How can the firm survive, grow and remain relevant. Examples of strengths Current profitable orders. Existing brand loyalty and brand recognition Loyal customer base Mailing list and details of …

Read moreSWOT analysis – Examples

Sugar tax debate

sugar-tax-fat-tax

Excess consumption of sugar is linked to several health problems, such as obesity, diabetes, and tooth decay. Consumption of sugar imposes costs on individuals (lower life expectancy) and the rest of society (higher health care costs + lower productivity). A tax on sugar would discourage consumption and raise tax revenue to fund improved health care. …

Read moreSugar tax debate

Item added to cart.
0 items - £0.00