"We know that the economy is turning a corner. We have record levels of employment. But we cannot for one moment be complacent. I'm determined we finish the job we started"
- David Cameron, U.K. Prime Minister
Last week's report showed the strongest growth in over three years in the third quarter, expanding 0.8% between August and September, after a 0.7% expansion in the preceding quarter. Though these figures certainly look like sustainable growth, the recovery, however, can hardly be described as balanced. As U.K. has become one of the fastest growing economies in the world, Tories are starting to claim their austerity measures vindicated. However, earlier in April, the IMF has blamed British government for trying to combine economic recovery with fiscal consolidation. Furthermore, even despite solid performance in all three sectors, the economy is locked in the slowest expansion in modern history. Manufacturing sector remains 6.1% lower than in 2008, while key services sector is 1.8% above the level it has been before the credit crunch. Hence, such a recovery cannot be described as balanced, partially explaining why services now account almost four-fifths of the economy. One of the main reasons behind this weakness is nation's flagging trade sector. Though the Pound lost almost 20% against main trading partners in recent years, the economy is experiencing a huge shortfall of exports over imports. Another fly in the ointment is huge inflationary pressure, with CPI at 2.7%, the highest in the EU. Moreover, real wages have experienced a sharp decline, resulting in the weak domestic demand. The last but not least is high expectations that interest rates will rise soon, auguring badly for already highly-indebted households and overall economy.
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