-Rob Wood, chief UK economist at Berenberg bank
The UK economy grew at the fastest rate in 2014, but weakened closer to the end of the year, as did the manufacturing production sector. A boost in the economy was detected, which was kick-started by plunging world prices of oil. Over the past seven months, oil prices dropped by more than 50%, reducing production costs dramatically. Nevertheless, the net effect for the UK is positive after the country became a net importer of energy more than ten years ago. Weak crude prices are argued to have a positive effect on manufacturing production. Manufacturing output rose only 0.1% in December, compared to the revised 0.8% growth in November. Industrial production dropped, whereas that a rise was expected. Industrial output did not meet expectations of a 0.3% increase, having fallen from -0.1% to -0.2% in December. The British economy remains under a close surveillance amid upcoming general election in May, as UK Prime Minister George Osborne seeks Britons support to be re-elected. Furthermore, retail sales in the UK rebounded from -0.4% in December to 0.2% in January. However, experts are warning that only heavy discounts are affecting the demand increase. The data suggests that consumers are willing to spend more money, as real incomes recently stopped falling. A rise in consumer spending is expected to boost significantly the UK's economy. According to NIESR, the UK growth accelerated to 0.7% in the three months to January after a downwardly revised 0.5% measured in the quarter to December.
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