Research Dept. News
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Monthly Report, num 292 - June 2006
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European Union - United Kingdom
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United Kingdom: consumption under scrutiny
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While United Kingdom undergoes substantial improvement in first quarter…
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With announcement of growth in the first quarter (2.2% year-to-year, an increase of four decimals over the fourth quarter), the main doubt about the state of the British economy remains the real state of private consumption. Available indicators, especially industrial production of consumer goods and the figure for retail sales in March, suggest that household consumption has improved as the first quarter has advanced.
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…worsening of labour market takes away from strength of economic recovery at beginning of 2006.
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Immediate prospects are for a continuation of recovery, if we are to go by the increase in consumer confidence in April. Nevertheless, the slowdown in employment (a drop of three decimals in the fourth quarter to 0.6%) and stagnation in the unemployment rate (3.0% in April with no change over March) make it clear that the final bases for a consistent recovery of consumption are still not settled.
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Industry may be leaving behind stage of lack of strength seen in recent quarters but inflation troubling Bank of England.
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With regard to other matters of interest, we should point out that, without stepping out of the present crisis stage in activity, industrial production marked up an advance of 0.3% year-to-year in March, the first positive figure since December 2004. On a less positive note, the rise in inflation in April (2.4% year-to-year as against 2.1% in March) was troubling, something that explains the signs recently given out by the Bank of England of a more restrictive turn in monetary policy.
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