"UK will be the fastest growing economy in the G7 this year"

date:  April 8, 2014

http://www.telegraph.co.uk/finance/economics/10752204/UK-will-be-fastest-growing-economy-in-the-G7-this-year.html

reference article:  http://www.telegraph.co.uk/finance/economics/10752002/How-Britain-became-the-fastest-growing-developed-economy.html


This article explains that the UK is expected to be the fasted growing economy this year.  The International Monetary Fund's projections believe that their previous growth projections were "too pessimistic" and that cheaper credit, as well as increased consumer confidence, have helped Britain to take on a strong rebound.  The IMF expects the UK's GDP to grow by 2.9% in 2014.  This is up from 2.4% in January and 1.9% in October.  This growth is predicted to be higher than the U.S. and Germany for the first time since 2008.  Inflation was expected to stay above the Bank of England's 2% target this year, at 2.5%, and unemployment was expected to stay quite high at 7.8%.  However, now inflation is expected to remain just below 2% and unemployment is projected to fall to just below 7% this year.
In class, we have commonly talked about the affects on consumer spending.  Low interest rates, increased income, increased demand, and increased needs of consumers.  An increase in income will allow for consumers to have some extra cash for spending.  Increased demand will cause for more spending, and increased needs of consumers will cause for households to increase their spending on certain products.  As a result of increased consumer spending, GDP will grow and will have a positive impact on the supply and demand.
Investment is the main thing that has led to the UK's projected growth.  Investment has strengthened and has presented a much healthier outlook on the economy as a whole.  Specifically, Britain's recovery  has been ultimately driven by consumer spending.  Interest rates, being kept artificially low, have encouraged consumers to spend more in order to boost the recovery after Britain's financial crisis.  These low interest rates imply poor savings rates, therefore there is much less of an incentive to save.  Additionally, many consumers have taken advantage of the low mortgage rates sided with the Government's "Help to Buy" scheme.  This overall increased spending has immensely helped raise confidence in the UK's recovery, which has led to a projected, fast-growing boost in GDP.