Group items tagged

The annual growth of productivity in the British economy increased by only 0.8% in 2005 the slowest growth since the recession year of 1990. There are many reasons for this sluggish growth of productivity. Part of the reason was the slowdown in growth in 2005 because output and output per worker tend to be positively correlated. In an economy where demand and output is weaker, people in work are not being used as intensively compared to when the economy is stronger. Deeper-rooted explanations for weak productivity performance focus on supply-side deficiencies. These include the effects of skills gaps in industry; and the transfer of the economy's resources into the public sector where productivity is lower. Other factors contributing to sluggish productivity growth include the effects of business red tape and a persistently low rate of spending on research and development.Low productivity growth means that little progress has been made in reducing the productivity gap that exists between the UK and most of her major competitors.

Overall the rise in VAT is likely to cause higher inflation, reduced GDP growth and some job losses in 2011 and into 2012 - so some deterioration in three microeconomic indicators at the expense of improved government finances. But in the long term a 20% VAT rate is unlikely to have any noticeable effect on UK competitiveness and growth. The long-term trend GDP is driven by supply side factors such as technological progress, working age population growth, improved work and enterprise incentives and the scale and quality of capital investment spending).

In the first half of 2010, the story was that the big emerging economies – India, China and Brazil – were acting as the locomotive for global growth. But during the second half of 2010, there were signs of the United States and Germany joining the party

Conversely, if the jobless total rises by Easter, inflation edges above 4% and consumers save rather than spend, Labour will be able to say that it is the coalition that has messed things up, killing off growth with its ill-timed and harsh austerity programme.

I think this has to do with more than just currencies. It is very convenient for industrial countries to point to currency intervention as the problem, because they are not directly guilty of that. Is it any surprise that China resists an international agreement where the sole focus will be exchange rates? But industrial countries are not beyond reproach on the kind of policies they have been following in recent years. Let us remember where this crisis originated ...

It is this gloomy backdrop which exercises the minds of the third and final group of experts, the bears. For them, the risk is both of a double-dip recession and a long, painful work out from the excesses of the past. Looking at the four main components of demand they would say that consumption is going to be weak so investment will disappoint. Government spending is going to be slashed, leaving a massive burden on exports at a time of slower growth and currency wars. The bears are currently the smallest group. Their numbers are likely to be swelled as winter progresses.