GRAPHIC-Shortages, inflation and slow growth fog UK economy

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LONDON, Oct 5 (Businesshala) – Britain’s economic boom after the coronavirus lockdown is being hampered by problems in supply chains, a surge in inflation and the risk of rising unemployment, complicating the task of driving the recovery for policymakers has gone.

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Former Bank of England chief economist Andy Haldane says the UK is in the VILE era of volatile inflation, low expansion.

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Financial markets now think the BoE is certain to raise interest rates by February, but some economists, concerned by signs of flagging recovery, are not so sure.

Below are some of the measurements of the UK economy that economic policymakers are likely to have in mind.


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Britain’s inflation rate hit 3.2 per cent in August, the highest in nearly a decade. Some lopsided factors are responsible for the record jump since July, but the BoE sees inflation rising above 4%, more than double its 2% target.

The BoE is watching for any signs that consumers are losing confidence that inflation will be contained in the long run.

Public expectations for inflation in the coming year rose sharply in September, which may have weighed on the minds of BoE rate-setters, according to a Citi/YouGov survey. He had said last month that the case for raising rates was getting stronger.

lack of growth?

While Britain’s economy grew sharply earlier this year as it reopened from a third COVID-19 lockdown, the latest readings show that momentum has largely waned. Economic growth slowed in July, according to official data, and surveys of businesses and consumers suggest sluggish growth continued into the second half of the year – even before the most severe supply chain problems seen in recent weeks.

supply chain problem

There has been no reduction in supply chain and staffing problems for British manufacturers dealing with huge delays from suppliers, according to the latest IHS Markit/CIPS survey of businesses.

Car traffic fell the biggest week-on-week in late September since early June, before panic at petrol stations due to a shortage of tanker drivers – another unexpected sign for the economy.

The labor shortage, which is seen in other economies around the world, has worsened since Britain’s decision to leave the European Union and end the free movement of workers from the bloc. But Prime Minister Boris Johnson denied on Tuesday that Britain was in crisis and said “its natural ability to sort out its logistics and supply chain is too strong.”

consumer spending

Supply chain disruptions and rising inflation took a heavy toll on the GfK gauge of consumer confidence last month – historically a good indicator of household spending.

Families are also facing cuts in state benefits and tax increases for working people.

BoE data published last week shows that consumers are once again leaning more towards saving than spending.

jobs and wages

Britain’s unemployment rate has fallen in six of the last seven monthly reports, helped by economic recovery and the government’s jobs-protecting furlough programme.

That plan expired at the end of September and the BoE is keeping an eye on whether unemployment is about to rise again.

Wages have been rising sharply, although the official measure of income growth has been amplified by statistical distortions caused by the pandemic. Still, inflation has started to cut into earnings: the official real measure of total wage growth has been running for three months.

Reporting by Andy Bruce, Editing by Timothy Heritage


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