Belfast Telegraph

UK's economic rollercoaster ride is not over yet

BY KATE HUGHES

OH dear, we were all getting a bit drunk on economic recovery figures for a minute there, especially with the Office for National Statistics revising GDP growth for the second quarter of this year upwards a little last week, at the same time that the OECD bumped up its forecast for the UK's economy in 2014.

So the question on everyone's lips is when will the macro situation have a micro effect? How long does it take for economic upturn to trickle down to us?

As you might expect, there isn't a straight answer, but as consumers the key elements of the wider economy that we tend to feel the effects of are real wage values against the effects of inflation and, of course, the rate of unemployment.

"If you look at indicators like these, our forecasts suggest that wages will start to rise faster than inflation next year, though that's based on inflation easing rather than wage growth," said Simon Kirby, a principal research fellow at the National Institute of Economic and Social Research.

"Unemployment is relatively flat. It may begin to fall slightly next year, though if growth is sustained it may begin to fall faster.

"But in GDP terms we're still recovering from the pre-recession peak and won't match that until early 2015. While people will notice wages rising faster than inflation, it will still be a few years before the 'average' person sees their standard of living return to what it was pre-crisis."

And then there's the interest rate sting in the tail.

If unemployment falls, real wages rise and the economy experiences sustained growth, this could bring forward Bank of England interest rates increases. The knock-on effects will hit different households in different and unequal ways.

So please remain seated with your belts securely fastened – the ride's not over yet.

Belfast Telegraph

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