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Miracles Can Happen

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Looks like Brown is well............in the Brown stuff

A miracle it is and Labour have acheived this is such a short measure of time.

From the National Office of Statistics


Government demand

Government final consumption expenditure rose by 0.7 per

cent in the first quarter of 2005. This represents a higher

pace of growth than in the fourth quarter of 2004 when

output grew by 0.4 per cent (Figure 12). Growth compared

with the same quarter ago was 1.5 per cent. The government

continues to be an important source of aggregate demand in

the economy.

The latest figures on the public sector finances report up to

June and show a deterioration from a year ago. The current

budget was in deficit by £4.7 billion, this compares with a

£3.5 billion deficit in June 2004. Public sector net borrowing

was £5.9 billion compared with net borrowing of £4.4 billion

in June 2004 – the highest total since 1993. These figures

reflect lower tax revenues and higher general government

spending. However, it is worth noting that monthly data can

be volatile. The financial year to date may provide a better

picture. In the financial year (April 2004 to June 2005) net

borrowing presently stands at £17.0 billion compared to

£13.3 billion to the same period in 2004/05. The current

budget deficit stands at £13.1 billion compared to the

£11.0 billion deficit in the same period of 2004/05. Since net

borrowing became positive in 2002, following the current

budget moving from surplus into deficit, net debt as a

proportion of annual GDP has risen steadily.

At the end of 2001 public sector net debt was 30.2 per cent of

GDP; by the end of June 2005, this had risen to 35.3 per cent

of GDP.

Trade and the Balance of Payments

The publication of the quarterly Balance of Payments shows

that the current account deficit widened in 2005 quarter

one to £5.8 billion from a revised deficit of £4.1 billion in

2004 quarter four (Figure 13). As a proportion of GDP

the deficit increased from 1.4 per cent to 2.0 per cent. The

widening deficit is mainly accounted for by a lower surplus on

investment income which rose by £8.0 billion in 2005 quarter

one compared to £9.2 billion in the previous quarter and a

higher deficit on current transfers which was £3.4 billion in

2005 quarter one compared to £2.9 billion in 2004 quarter

four. The lower surplus in investment income is due to a strong

rise in foreign earnings on holdings of UK equity and debt

securities offsetting a growth in UK earnings from investments

abroad. The deficit in current transfers is mainly due to higher

net contributions to EU institutions, but also partly to aid

transfers associated with the Asian Tsunami.

The run of current account deficits since the 1998 Labour Government reflects the

sustained deterioration in the trade balance. The UK has

traditionally run a surplus on the trade in services, but this

has been overwhelmed by the growing deficit in trade in

goods. The long run deterioration in the UK’s trade deficit

is possibly due to exports growing more slowly than world

trade due to the high value of sterling and weak demand from

Continental Europe, whilst imports have grown strongly due

to high domestic spending.

According to the latest monthly trade figures, the UK’s deficit

on trade on goods and services is estimated to have improved

to £3.5 billion in May from a revised deficit of £3.7 billion in

April. In the three months ended May, the deficit on trade in

goods and services improved to £10.4 billion, from a £10.6

billion deficit in the previous three months.

average wage growth in May for the public sector was

5.6 per cent compared to 3.8 per cent in the private sector.

Overall, inactivity increased in the three months to May

2005, continuing the trend from the three months to April

but reversing the story earlier in the year where there

was decreases in inactivity amongst most categories. The

number of economically inactive people of working age was

up 125,000 over the quarter to 7.91 million. Over the year

the number increased by 64,000. Students registered the

largest increase of 63,000 followed by those looking after the

family/home on 49,000. Those on long-term sickness rose by

18,000. Inactivity amongst the retired increase by 2,000. This

contrasts with a fall of 8,000 in the previous quarter.

According to the LFS, in the period March to May 2005,

72,000 jobs were lost. The majority of the job losses was

in employee jobs, which were down by 55,000 followed

by government supported training & employment

programmes,which fell by 12,000. Self-employed jobs

actually fell, by 5,000, continuing the trend of the previous

quarter. Also, full-time jobs decreased by 96,000 over the

period while part-time jobs increased by 41,000. These latest

figures reverses a picture of steady growth in employee jobs

since the beginning of 2004, whether this is a temporary blip

remains to be seen.The numbers for the self-employed have

been more volatile but previous quarter numbers suggest a

downward trend.

The industry dis-aggregation from the survey of employers,

‘workforce jobs’ is available for the three months up to March

2005. Workforce jobs increased by 78,000 on the quarter

and by 213,000 on the year. Figures show that finance &

business services posted the biggest increase on the quarter

of 44,000 followed by construction at 23,000. Education,

health and public administration registered an increase of

18,000 reversing a decrease of 4,000, in the previous quarter.

Manufacturing jobs continues to lose numbers, declining by

23,000 on the quarter and 86,000 on the year.

After steadily rising throughout most of 2004, headline

average earnings growth stabilised at the beginning of 2005.

However, the latest figures show a deceleration. Figures based

on the average over a three- month period show that in the

year to May 2005, average earnings excluding bonuses rose by

4.0 per cent, down from 4.1 per cent in the previous month.

Average earnings, including bonuses was 4.1 per cent, down

from 4.6 per cent in the previous month.

Wage growth in the public sector, excluding bonuses continues

to outstrip that in the private sector. In May 2005, this widened

further. Annual wage growth in May was 3.8 per cent in the

private sector and 4.8 per cent in the public sector. When it

comes to including bonuses, the latest figure shows the public

sector out-stripping the private sector for the first time time in

three months. This is a similar situation to much of 2004 where

the public sector was out-stripping the private sector. The threemonth average wage growth in May for the public sector was

5.6 per cent compared to 3.8 per cent in the private sector.

The evidence continues to imply that the tight labour market

is failing to stoke inflation pressures in a major way. One

possible explanation for this lies in the relatively strong

productivity growth in the economy since the final quarter

of 2003, although this weakened slightly in 2005 quarter one.

Consequently, the growth in unit wage costs, which are based

on the ratio of wages to productivity growth have been flat

for the past year, despite the steady rise in average earnings.

Another possible explanation could be due to the fact that the

labour market is indeed softening and this is leading to lower

wage growth.

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  • 341 Brexit, House prices and Summer 2020

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