Archive for November 28, 2014

UK Economic Growth is Fueled by Consumer Spending

There are not many convincing recovery stories across Europe yet, but the growth being seen across the UK economy over the last 18 months is genuinely encouraging.  Whilst most European countries hover around 0% growth rate and many looking at more recession, the UK economy seems to be moving forward.

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However there is a worry that this might not be a sustainable growth and the recovery is simply being pushed by increased consumer spending.  Today the news is filled with hysterical shopping scenes as the American ‘Black Friday’ promotion is embraced by UK retailers, seems to add more evidence to this idea.

The problem is that growth that is completely dependent on consumer spending is not sustainable in the long run.  UK consumers can’t keep spending to maintain economic activity, without incurring debts and following the road that partly caused the crisis in the first place.   The Japanese economy has seen this type of growth in the 80’s when consumers would routinely discard their TV sets every year in order to purchase the latest model.

The growth in the UK economy is also combined with falling exports to the eurozone and some measures suggesting business investment is falling too.  Trade has actually caused a negative impact on growth for the last quarter, which suggests that this consumption is partly causing UK imports to rise heavily too.

If the Euro countries where expanding too, then this wouldn’t be too much of a problem, with consumer spending merely providing some impetus.  However as exports fall to the doom laden Euro economies, consumer spending simply won’t be enough.  Much of the UK’s recovery has been based on austerity measures which means that the wages of these consumers haven’t been rising either.

There are some encouraging signs that wages are starting to increase but nothing dramatic.  If the recovery filters into pay cheques then consumer spending might be maintained in 2015.  There are some interesting articles on this situation in the UK economic press and online media, you can access some of these by obtaining a British IP address – here.

There’s not yet a crisis in the UK economic recovery however it desperately needs an improvement in it’s main trading partner’s economies – across the channel.  Until that happens, the recovery and growth may not continue.

Joe Simpson

Writer on technology, entertainment and economics.

Source:http://iplayerusa.org/index.php/proxy-to-access-bbc-iplayer-abroad/