2023 UK MACRO MAIN STATS Flashcards
annual growth rate
4% in 2022, strong recovery following huge contraction during pandemic in 2020
annual growth forecast 2023
0.6%, very low, down from 2022
due to cost push inflation, oil, electricity and food prices
low producer and consumer confidence affecting investment and consumption, contractionary fiscal and monetary policy
output gap (actual gdp as percentage of potential gdp)
-1.6% (Q3 2023), changed from a positive output gap in previous years due to easing supply side conditions and waning demand
GDP per capita
£47,000
Total GDP
£2.3 trillion
79% services
14% manufacturing
6% construction
1% agriculture
unbalanced growth due to service-domination
unemployment
4% in Q3 - low, signals resilient labour market
however, has risen during the year due to increasing negative output gap
employment
75%, high but slight decrease during the year
economic inactivity rate
21%
has risen during covid, mainly driven by people in their 50s and 60s who have not returned to work
supply side policies have been employed to try to bring them back
youth unemployment rate
10% - low and down from 14% during pandemic due to strong services rebound and targeted policies
long term unemployment rate
1%, very low and healthy
wage growth
7%, strong due to a tight labour market, e.g. UK trade unions have been strong and demanding higher pay; even in private sector
higher than inflation so real wage is positive but much lower, around 2.7%
consumer confidence
very low
negative real wages, high inflation, low growth forecast, rising unemployment forecast
has been slight increase during the year but overall still not optimistic
job vacancies
have been falling since UK reached record high figure in 2022, but still very high.
indicates tight labour market is loosening (labour shortages are falling)
with negative forecast growth and low business confidence, employers are less willing to hire workers so vacancies are falling
inflation (CPI)
6.7% in Q3 - way beyond target rate of 2% but forecast to fall to about 5%
driven by supply side factors - oil, fuel, electricity, food, strong wage growth and weak pound
is also rising in main trading partners, but is much higher than them
core inflation (underlying inflation)
5.7% Q3 - higher than target but since CPI is higher, shows that food and energy are the drivers of inflation
CPI but excluding food and energy which are very price volatile
producer price inflation
measures wholesale price inflation
negative since June 2023, is lower than CPI for first time in 2 years, meaning CPI is expected to fall
inflation expectations
what households think inflation will be over next 12 months
around 4%
this drives wage growth
it is lower than 7% wage growth rate, which means wages will rise more slowly, even though wage growth is above target
food price inflation
19% - disproportionate impact on lower income households
current account deficit (% of GDP)
approx 4% Q2 - high persistent CA deficit driven by high labour costs and low labour productivity
productivity and investment
20% below the average rate of other G7 countries and is 25% below pre-financial crisis rate
directly reduces export competitiveness and drives CA deficit
exchange rate
weak relative to major trading partners like US and Eurozone
£1 = $1.28
£1 = 1.16 euro
although has potential to increase X competitiveness, UK is a net importer of necessities like raw materials, semi-finished goods and capital goods - unavoidable
this is driving cost push inflation and worsening CA position
minimum wage
£10.42 / hour, higher than inflation which is what is increasing unit costs and lowering competitiveness
growth of major trading partners, US and Eurozone
both forecast to experience slower economic growth, bad news for UK exporters
budget deficit
9.5% of GDP in Q3, has been increasing since 2021-2022 fiscal year, is due to the fiscal support to economy during and after the pandemic, and the decrease in indirect and direct tax revenue during recession
national debt
almost 100% of GDP in Q3! this is due to the high budget deficit
remember: if a deficit exists, you MUST be borrowing the excess
bond yields
roughly 3.5% - government will spend 116b pounds JUST on servicing debt!
IT’S MORE THAN THE UK SPENDS ON EITHER HEALTHCARE OR EDUCATION! OPPORTUNITY COST IS HUGE
this is why contractionary fiscal policy is being used, i.e. increasing income and corp tax
reflect the cost of borrowing for the govenrment and has risen in line with the inflation rate
income tax bands
£12,570 is tax free allowance
top tax band is taxed 45%
these are FROZEN until 2028! FISCAL DRAG due to incomes rising year by year in line with inflation (no real increase) and people being dragged into higher tax bands, ending up worse off
can use these figures for incentives! Laffer/SS policy
corporation tax
25% - significant rise from 19% in 2022
VAT rate
20%
gini coefficient
0.36 - relatively low income inequality
BoE base interest rate
4.25%, rise from 0.1% in 2021
has been increasing to target higher inflation, but is not working due to inflation being largely due to SS causes
average lending rate
base rate BOE charges comm. banks/other lenders for borrowing
5.25% - has increased due to higher base rate
transmission mechanism is working in the upwards direction!
bank willingness to lend
good despite a few bank failures due to higher interest rates
consumer confidence
very low - not willing to borrow or spend
business confidence
very low - not willing to borrow or invest
BUT might increase as Brexit uncertainty fades, SS constraints fewer, inflation rate falling
savings ratio
9% - high due to high uncertainty in cost of living crisis
proportion of disposable income saved instead of spent
quantitative easing
around 40% of GDP
very expansive, has likely contributed to high inflation
