uk economic growth shows signs of slowing
2024-10-04
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on september 23, participants walked in the liverpool exhibition center in the uk, where the labor party annual conference was held. photo by xinhua news agency reporter li ying
data from the british office for national statistics shows that since the british real gross domestic product (gdp) registered zero month-on-month growth in june, real gdp growth continued to stagnate in july, lower than the 0.2% growth rate previously expected by economists. british finance minister rachel reeves said that the performance of july's economic data made her clearly aware of the severe challenges facing the british economy, and accused the conservative government of leaving a "mess" of 14 years of stagnant economic growth. the labor party the government cannot make change happen "overnight".
the monthly statistical data released this time is the first economic report card since the new labor government led by british prime minister starmer came to power on july 4. before the national bureau of statistics released the data, economists generally believed that the economic slowdown in june was temporary and caused by political uncertainty in the run-up to the election. but at present, monthly economic performance shows that the british economy has deviated from the moderate growth track starting at the end of 2023, and will move towards a path of declining growth in the second half of 2024. the bank of england previously predicted that the british economic growth rate is expected to be 0.4% in the third quarter and will further slow down to 0.2% in the fourth quarter.
specific economic data showed that the total output of the service industry actually increased by 0.1% month-on-month in july, while it fell by 0.1% in june. the biggest driving force for the growth of the service industry in july came from the information technology and communications industry. the monthly output of this industry increased by 0.8%, mainly driven by economic activities such as computer programming, it consulting, and ai. wholesale and retail trade also achieved positive month-on-month growth. the economic output of the wholesale trade industry rebounded after falling by 1.1% in june, with an increase of 0.7% in july. at the same time, the retail industry bucked the trend and grew by 0.5% in july after output fell by 1.2% in june, with total non-food sales (sales of department stores, clothing, home furnishings, etc.) increasing by 1.4% month-on-month. the rebound in retail growth is mainly due to seasonal factors. most retailers said that the summer discount season, european football matches, etc. boosted sales.
among the production sectors, the manufacturing sector fell by 1.0% month-on-month in july, which was the main reason for the decline in total output of the entire production sector. among the manufacturing sectors, the largest decline in output was in the transportation equipment manufacturing industry (down 2.3%). data from the society of motor manufacturers and traders (smmt) show that british automobile production fell by 14.4% in july. the main reason for the decline in output was the transformation and adjustment of automobile production lines to electric vehicles and temporary difficulties in the global supply chain. as of july this year, british automobile exports have dropped by 14.3% month-on-month, and exports to major markets such as the eu, the united states, and china have all declined, reflecting the competitive challenges faced by british automobile companies in the world. smmt ceo harveys said that in fact, as the automotive industry electrifies and reorganizes and transitions to zero-emission vehicle production, the volatility of british vehicle production and exports is likely to continue. british car companies need to seize every opportunity to improve their global competitiveness so as to drive a rebound in car production. at the same time, the uk needs healthy markets, cheaper green energy and seeks to establish more efficient trade deals to support british carmakers' easier integration into global markets.
inflation data released by the british bureau of statistics on september 18 showed that the british inflation rate remained stable in august, and the consumer price index (cpi) rose by 2.2% in july. at the same time, driven by rising prices in the air transport industry, the services price index closely tracked by the bank of england (a core indicator of upward pressure on domestic price levels in the uk) rose to 5.6%, slightly higher than the 5.5% expected by economists, and this is higher than the 5.2% in july, showing that upward pressure on inflation is still there. although recent data shows that the uk economy's total output growth has stagnated and wage growth has slowed, core inflation remains firm, which will have an important impact on the bank of england's interest rate cuts, changing the bank of england's options for further easing monetary policy restrictions in the short term. it will be more difficult for them to cut interest rates, slowing down their pace of interest rate cuts. another factor affecting the decision to cut interest rates is the disappointing performance of the british economy in july, which provides reasonable support for interest rate cuts. the stagnation of economic growth may prompt the bank of england to loosen monetary policy at a faster pace and to a greater extent in the second half of the year. under the superposition of two opposing driving factors, the path of the central bank's interest rate cut is more uncertain, which means that it cannot make the decision to cut interest rates as quickly as the federal reserve.
the market expects the uk autumn budget to support economic growth. disappointing economic data in july means that the economic slowdown in the second half of the year may be more severe than expected, and the growth forecast for the third quarter will be revised sharply downward. the market believes that in order to enhance corporate confidence in growth and investment, companies need a predictable and efficient tax system and policies to support growth. the labor government's upcoming autumn budget must send a strong, positive message about growth. starmer and reeves have put growth at the heart of labour's agenda, but the autumn budget will likely include "painful" options such as tax increases. after becoming chancellor of the exchequer, reeves said that this government inherited a public finance deficit of 22 billion pounds from the previous conservative government. as the autumn budget approaches, the prospect of tax hikes has made consumers increasingly uneasy and they have become more cautious about spending in the second half of the year. while starmer has recently insisted that next month's budget will not contain any measures to curb economic growth and sees stabilizing public finances as a prerequisite for economic growth, he has also ruled out raising vat, income tax and national insurance premiums. policy possible. however, the market still predicts that the labor government will reform the tax system and increase capital gains tax, inheritance tax and energy tax.
in the long term, economic growth still requires investment support. recently, the oecd stated that the british government needs to consider tax reform and increase the upcoming government budget. according to the financial times, eight economists recently warned the labor government that if the labor government inherits a "tightening" fiscal policy, that is, reducing the proportion of government investment expenditure in gdp, it will repeat the long-term economic growth of the previous conservative party. stagnation and mistakes. the long-term lack of public investment in the uk has led to a vicious cycle of stagnation and recession. low investment not only leads to economic weakness and difficulty in improving labor productivity, but also causes serious social and environmental problems. the labor government has committed an extra £4.7 billion a year to energy and the green transition, but this will still lead to a decline in net public sector investment as a share of gdp. the institute for fiscal studies (ifs) said that by the 2029-2030 fiscal year, british government investment will account for about 1.7% of gdp, down from the 2.5% expected in the most recent year. economists warned that cutting investment in the name of fiscal prudence will damage the economic foundation. they also called on the british government to further increase the budget, expand public sector borrowing, establish a long-term and sustainable government investment framework, and avoid "short-term thinking" in the fiscal budget. unleashing the potential for long-term growth in the uk economy through a scaled-up approach to sustainable investment. (source of this article: economic daily author: ma pianyu)
source: economic daily
