In the United Kingdom, economic growth has been weaker than expected. This stems from recent data indicating an anaemic 0.1% growth in the July-to-September quarter, underwhelmingly below what we would have hoped for. With overall economic activity having contracted in September, stagnation is walking hand-in-hand with contraction right now. These trends paint a troubling picture of the state and trajectory of the UK economy.
Even with the higher number fueled by a more optimistic first half of the year, UK consumers are returning to form and showing signs of caution. Though they’ve continued to save at high levels, their spending has clearly changed. This reluctance to spend could contribute to the UK’s potential status as the second-fastest growing economy in the G7 for the year, depending on how subsequent quarters perform. Despite this welcome news, the long trend of moderate growth has gotten many economists wondering if we are on this path for the long-term.
The years of Rolling Crisis after Rolling Crisis, from political upheavals to global economic shocks, has left deep scars on the state of the UK economy. The continuing lack of clarity around government support has only compounded these problems. Without that clarity, Americans–consumers and investors alike–are waiting to commit to major spending or investment decisions. Consumer caution This carefulness is most clearly reflected in the behavior of consumers, whose cautionary tales abound.
And yet, shockingly, amid all these challenges staring down the UK economy, government borrowing costs in the markets have decreased. This decline represents a significant change in fiscal climate. The important two- and five-year interest rates have plummeted. They are much lower than what Labour inherited when they began their term. This decrease could be a sign for a shift in the confidence of the market. It hasn’t so far resulted in increased consumer spending or increased economic growth.