Research Dept. News
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Monthly Report, num 290 - April 2006
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European Union - United Kingdom
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United Kingdom: is consumption recovering?
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Following various poor quarters, consumption may be moving up, going by retail sales and consumer confidence.
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Private consumption is the subject of sharp examination in recent months. The notable slowdown in British household spending in the second half of 2005 had set off the alarm bells. On top of this, the Christmas season showed a mediocre result. The latest news represents a change of stage, with retail sales moving up in February and consumer confidence marking up three consecutive months (December to February) on the rise. The stabilization of consumer prices at relatively contained prices (in February it was again 2.3% year-to-year with no change over January) represents a further positive factor.
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Definitive consolidation will require labour market in better state.
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In any case, the final verdict is still up in the air given that the latest bases of consumption continue without either improving (the unemployment rate held at 2.9% in February which represents the fifth consecutive month with no change) or worsening (employment slowed in the fourth quarter to 0.6% year-to-year as against 0.9% in the third quarter).
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Construction, industry and services begin to show better growth rates.
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The signs of incipient recovery also extend to the various sectors of the economy. Construction orders have recovered in the early part of 2006, confidence in services has left behind the relative dip seen in the fourth quarter and even industry, the sector which has long suffered the worse decline, may be changing step. In January, the drop in industrial production was approximately half that recorded in December and the trend in industrial orders and sector confidence (two early indicators) tend to confirm a recovery in secondary industry.
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