In many ways the economy is in a good position. The main economic indicators suggest a strong and sustainable economy, which offer good prospects for 2008.
- Economic growth, at 2.6% is close to the long run trend rate.
- Unemployment, according to JSA measure, is under 1 million. At 3% of the labour force this is fairly close to full employment. (although the more reliable Labour force survey suggests the true level of unemployment is higher.
- CPI Inflation is 2.1%. This is almost exactly the government’s target of 2% +/-1
The main economic predictions forecast similar statistics for 2008. Economic growth is forecast to continue at around 2.5%. In the latest Bank of England inflation forecast, they predict inflation will rise slightly before dropping back to 2% at the end of 2009.
All these statistics and forecasts suggest that the government is correct to claim that the UK economy is in a very strong position for 2008.
However, there are several trends which suggest that this optimism may be misplaced.