"After seeing a strong beat for GDP in June, surprisingly strong retail sales figures and upbeat survey data over the summer, optimists would be forgiven for thinking the UK economy was defying the doubters. That wasn't to be this month, the UK economy is firmly back in the slow lane. Stagflation remains the key challenge for policy makers. With anaemic growth and inflation running at 3.8%, the Bank of England may feel its hands are tied."
"Overdo it on rate cuts to help revive an ailing economy and you could risk runaway inflation. The key lever to revive our fortunes and get the economy moving again must then therefore be a fiscal one. The continued weakness in the UK economy will put pressure on the government to revise its approach to growth. The chorus of voices shouting you cannot tax your way to growth will grow ever louder as the evidence piles up. The chancellor appears to be running out of road."
UK GDP was flat month-on-month in July following a 0.4% rise in June. GDP rose 0.2% in the three months to July. Services output grew 0.1% month-on-month and construction output grew 0.2% month-on-month, while production output fell 0.9% month-on-month. Growth remains anaemic and inflation is running at 3.8%, creating stagflationary pressure. Policymakers face a trade-off between cutting rates to stimulate growth and risking higher inflation. Fiscal policy is identified as the primary lever to revive growth. Continued economic weakness will increase pressure on the government to change its growth approach.
Read at London Business News | Londonlovesbusiness.com
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