It would seem that economic indicators confuse economists as well as the rest of us. The first two paragraphs of the recently published Executive Summary of the OBR makes for interesting reading.
Here’s a bullet point summary:
- The UK economy has continued to recover.
- In the final quarter of 2013, GDP growth matched our December forecast, inflation fell back to target and unemployment dropped more quickly than expected.
- But productivity and wage growth remained disappointing.
- Revised data published since our last forecast suggest the economy grew slightly faster over 2013 as a whole than we expected in December, with GDP up 1.8 per cent on the previous year.
- Consumer spending, supported by a falling saving ratio, has been the biggest driver of recent growth.
- The latest data suggests that business investment is recovering.
- Housing market indicators have picked up sharply.
- But export performance remains disappointing.
- Given the momentum the economy carried into 2014, we have revised our GDP growth forecast up slightly to 2.7 per cent in 2014 and 2.3 per cent in 2015.
- We expect quarterly growth rates to ease through 2014 as consumer spending growth slows to rates more aligned with household income growth.
- The outlook for productivity growth, which underpins income growth and the sustainability of the recovery, remains the key uncertainty.
Whilst this is positive news let us hope that we are not led into another “boom and bust” scenario fuelled by unsustainable property prices and consumer expenditure funded by lower savings and increased household debt.
Hopefully, Government will see the sense in stimulating business investment, encouraging productivity growth, and supporting our exporters.