Tuesday, January 31

Troy's briefs no 9

Troy's briefs - changed (mostly) weekly. This week by briefs are a brief over view of the economy.

The UK economy is set to grow in line with HM Treasury's (revised) predictions over the next year, according to the latest estimates.
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A study from the good old National Institute of Economic and Social Research predicts that the UK's GDP will grow by 2.3 per cent in 2006. This figure is in line with December's pre-Budget report, in which chancellor Gordon Brown said the GDP would rise (having revised his estimates downwards) by two to 2.5 per cent.
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While the forecast growth will still be below trend, a pick-up will come from domestic demand as investment, government consumption and household spending all strengthen. In other words it can only get better.
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An improvement in net trade will add to the recovery in 2007, when the NIESR says GDP is expected to grow by 2.7 per cent. But that is just below Brown's prediction of 2.75 per cent over the year.
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Other key findings of last Friday's report are that export growth will strengthen over the next two years.
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Inflation will remain around the government's target rate of two per cent.
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An increase in net migration will put downward pressure on inflation and boost GDP growth.
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The housing market remains very much overvalued by around 20 per cent, largely because of the favourable tax treatment of owner-occupied housing, says the study. Thus this blog predicts a sharp national reduction in house values over the next twelve months.
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The report also finds that the government will continue to run an overall budget deficit of around three per cent of GDP between 2005/06 and 2007/08.
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But it predicts the current-budget deficit will narrow to £9bn or 0.7 per cent of GDP, in 2006/07, most of which is structural since the economy will be operating at capacity by the end of 2007.
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The governor of the Bank of England suggested yesterday (Monday) that an increase in tax rates has contributed to the decline in consumer spending and slower economic growth; wich is of course blindingly obvious.
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Trimming the Bank's forecast for growth this year, Mervyn King remained optimistic about future prospects. However he said: "In the second half of 2004, disposable incomes were lower in nominal terms than a year earlier, so it was hardly surprising that households had less to spend."
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Mind you if there is a major (long term) political crises (ie an other war in the Middle East) the long term effect on oil prices will bugger up most of the above assumptions.
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Indeed so.

1 comment:

Sarah Hopperty said...

Gosh isn't Economics complecated !