By Afolabi Thomas
In the first quarter of 2015 the UK economy grew by about 0.3%, slower than the 0.6% growth recorded in the third and fourth quarters of 2014. What provided the most downward pressure to the GDP was found in the business service & finance industry in January, and the largest contributor came from the ‘professional service’ industry. In February, these sectors turned around due to an increase in output.
Contributions to total services output growth from headline sub-industry groupings (month on month, percentage points)
What people are talking the most about is unemployment, which has been one of the most interesting characteristics of the labour market. Over the past 18 months, unemployment has reduced by 2% to 5.6% on the three months to February 2015. This has been the fastest decline in unemployment in over 40 years. Most of the reduction is consequence of the ‘flexibility’ of the labour market, with many firms doing the following:
1) downsizing their workforce to limit their costs of labour
2) reducing the number of hours worked – either by increasing the number of part-time workers employed, or by decreasing the hours existing workers have
3) reducing the quantity of labour.
The trade deficits, however, are looking better but still not great. The deficit over the course of 2014 was £97.9 billion (5.5% of GDP), the highest since comparable records began. The main drive of this most recent quarter was from the improvement of the trade balance, which was a £4.1 billion rise in exports and £0.2 billion fall in imports. At its current standing, the UK holds as the worst current account balance in the G7. This is something that the new Tory government should be looking into during this term.
Current account balance in the G7 economies (% of nominal GDP)
Sources: The Office of National Statistics