2023 UK MACRO MAIN STATS

Question 1

annual growth rate

Answer 1

4% in 2022, strong recovery following huge contraction during pandemic in 2020

Question 2

annual growth forecast 2023

Answer 2

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

Question 3

output gap (actual gdp as percentage of potential gdp)

Answer 3

-1.6% (Q3 2023), changed from a positive output gap in previous years due to easing supply side conditions and waning demand

Question 4

GDP per capita

Answer 4

£47,000

Question 5

Total GDP

Answer 5

£2.3 trillion

79% services
14% manufacturing
6% construction
1% agriculture

unbalanced growth due to service-domination

Question 6

unemployment

Answer 6

4% in Q3 - low, signals resilient labour market

however, has risen during the year due to increasing negative output gap

Question 7

employment

Answer 7

75%, high but slight decrease during the year

Question 8

economic inactivity rate

Answer 8

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

Question 9

youth unemployment rate

Answer 9

10% - low and down from 14% during pandemic due to strong services rebound and targeted policies

Question 10

long term unemployment rate

Answer 10

1%, very low and healthy

Question 11

wage growth

Answer 11

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%

Question 12

consumer confidence

Answer 12

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

Question 13

job vacancies

Answer 13

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

Question 14

inflation (CPI)

Answer 14

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

Question 15

core inflation (underlying inflation)

Answer 15

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

Question 16

producer price inflation

measures wholesale price inflation

Answer 16

negative since June 2023, is lower than CPI for first time in 2 years, meaning CPI is expected to fall

Question 17

inflation expectations

what households think inflation will be over next 12 months

Answer 17

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

Question 18

food price inflation

Answer 18

19% - disproportionate impact on lower income households

Question 19

current account deficit (% of GDP)

Answer 19

approx 4% Q2 - high persistent CA deficit driven by high labour costs and low labour productivity

Question 20

productivity and investment

Answer 20

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

Question 21

exchange rate

Answer 21

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

Question 22

minimum wage

Answer 22

£10.42 / hour, higher than inflation which is what is increasing unit costs and lowering competitiveness

Question 23

growth of major trading partners, US and Eurozone

Answer 23

both forecast to experience slower economic growth, bad news for UK exporters

Question 24

budget deficit

Answer 24

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

Question 25

national debt

Answer 25

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

Question 26

bond yields

Answer 26

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

Question 27

income tax bands

Answer 27

£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

Question 28

corporation tax

Answer 28

25% - significant rise from 19% in 2022

Question 29

VAT rate

Answer 29

20%

Question 30

gini coefficient

Answer 30

0.36 - relatively low income inequality

Question 31

BoE base interest rate

Answer 31

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

Question 32

average lending rate

base rate BOE charges comm. banks/other lenders for borrowing

Answer 32

5.25% - has increased due to higher base rate

transmission mechanism is working in the upwards direction!

Question 33

bank willingness to lend

Answer 33

good despite a few bank failures due to higher interest rates

Question 34

consumer confidence

Answer 34

very low - not willing to borrow or spend

Question 35

business confidence

Answer 35

very low - not willing to borrow or invest

BUT might increase as Brexit uncertainty fades, SS constraints fewer, inflation rate falling

Question 36

savings ratio

Answer 36

9% - high due to high uncertainty in cost of living crisis

proportion of disposable income saved instead of spent

Question 37

quantitative easing

Answer 37

around 40% of GDP

very expansive, has likely contributed to high inflation