recovery

Economic growth with falling real wages

Economic growth with falling real wages

The UK recovery paints an unusual situation. We have both positive economic growth and falling real wages. How can we have economic growth with falling real wages? Real wages are not the only source of economic growth. We can see growth from other components of AD – I (Investment), G (Government spending) plus net exports (X-M) Also, it is possible for consumer spending to rise despite falling real wages (at least in the short term). For example, if spending is financed by borrowing or declining savings ratio. Consumer spending could also be…

Sustained economic recovery?

Sustained economic recovery?

Readers Question: Seeing the recent releases of positive UK data come through, I’ve been thinking whether these are signs of a recovery or it is too soon to say. To what extent is the recent run of positive data across sectors a sign of a balanced & sustained recovery in the UK? (question 7th. Nov) It is a good question. If we look back to 2010, there were signs of economic recovery, but this was not sustained – with the economy going back into recession. In 2013, the evidence is…

Britain’s recovery – strong or weak?

There are different ways of looking at the UK recovery. Firstly, we can look at the damage done to the economy since the peak in 2008.The black lines suggests a possible pre-crisis trend rate of economic growth. A rough rule of thumb, suggests that had economic growth been maintained at the pre-crisis trend rate the UK would be looking at significantly higher GDP. In Q3 2013 GDP was estimated to be still 2.5% below the peak…

UK economic recovery

UK economic recovery

The UK economy has experienced the most prolonged decline in real GDP on record. GDP is still lower than before the start of the great recession in 2008. This unprecedented recession has been prolonged – despite a sharp depreciation in the Pound, and a raft of unconventional monetary policies. However, recent statistics suggest there are some reasons to be more hopeful and the UK economy is starting to recovery. Yet, despite the recovery, many analysts still worry that the economy is unbalanced and could be vulnerable to a further…