The Strategist

UK's Growth Revisions


03/31/2015 - 20:06



The revised GDP data will boost the election campaign by Conservatives for the upcoming General elections.



UK's Growth Revisions
The UK economy revised its growth upwards to 2.8% as compared to its earlier estimate of 2.6% for the year 2014. This growth was faster than many leading developed nations. This revision will work in favour of Conservative and Liberal Democrat parties in the coming general elections to be held on 7 May 2015. This hike signals that the UK economy expanded at its highest rate since 2006. The fourth quarter growth was also modified from 0.5% to 0.6%. The upwards revision was driven by substantial surge in household spending and an increase in exports in the fourth quarter of 2014. Increasing domestic consumption and an expansion in the trade balance are the key elements driving the fourth quarter growth.
 
The healthy portrait of Britain’s economic health originates as a surprising advantage for the government prior to the general elections. However, the recent polls indicates that David Cameroon, UK’s Prime Minister presently in alliance with Liberal Democrats are in close competition with the major opponent Labour Party.

The analysts believe that UK has a brighter economic outlook for 2015 as heavier pay checks and restrained prices led by cheaper crude oil in the global markets are likely to stimulate household consumptions.

The unemployment has dropped below 6% and the inflation fell to zero for the first time in past 5 decades. The investor’s confidence is steered by many good news about the UK economy. In response, the Sterling surged from $1.476 to $1.479. Moreover, the sterling also strengthened against Euro thereby rising to €0.726.

Over the past 13 years, the consumer confidence in the UK was at its peak in March. It has steadily increased since the start of 2015. According to monthly surveys, there was a high optimism about both the outlook of the economy as well as household income. This is expected to be a good news for the UK government in upcoming elections. After a five long years of pressure, now the household disposable income are improving modestly. Standard of living is thus a vital element for the general election campaign. Despite strong recovery in last quarter of 2014, the real disposable income increased by just 0.1% per head in 2014.
 
The improvement in country’s trade balance helped in pulling down the fourth quarter current account deficit to £25.3 billion as against £27.7 billion in the third quarter. This was mainly due to falling trade in goods deficit and rising surplus for trade in services. Although, UK’s current account deficit for the year 2014 was £97.9 billion in 2014 in comparison to £76.7 billion in 2013.This was equivalent to almost 5.5% of the national income, the highest recorded current account deficit over the last 5 decades. The growth was largely dependent upon services sector that expanded by nearly 0.9% in the fourth quarter of 2014.
 
The fundamentals of the UK economy looks quite promising at least from the viewpoint of consumer spending. The consumer purchasing capacity is likely to mark substantial improvement fuelled by low price inflation. According to IHS Global Insight, the UK’s GDP is expected to grow 2.7% with positive growth economic prospects for the year 2015.