Download Unemployment since 2000 GDP growth Inflation since 1920 UK

Inflation since 1920
A prime target of macroeconomic policy is the rate of inflation (the
rate of change of the consumer price index). Figure 3 shows the time
path for this since 2004. The government has set a target for the
inflation rate of 2% per annum, and the Monetary Policy Committee
of the Bank of England has responsibility for meeting the target. The
main instrument for achieving this has been the interest rate, but
the financial crisis of the late 2000s and the subsequent recession
required a new approach.
It is useful to set the inflation rate into historical perspective, which
is done in Figure 4. The history of inflation makes the recent period
seem one of calm. The earlier episodes saw deflation (falling prices,
or negative inflation) in the Great Depression of the 1920s, a period
of rapid inflation at the time of the Second World War, and rapid
inflation at the times of the oil price crises of 1973–74 and 1979–80.
Bank rate
6
Change in CPI Target 2%
Upper bound Lower bound
5
4
3
2
1
Year
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
Source: ONS, Bank of England
The percentage unemployment rate is an important indicator
of the health of the economy. Figure 2 shows two measures of
unemployment in the UK. The claimant count shows the number of
people claiming the Job Seekers’ Allowance (JSA), but this excludes
some people who would like to work but do not qualify for the JSA.
The ILO (International Labour Office) measure is preferred, and
is the measure used across countries as the accepted indicator of
unemployment.
Note: Data for Greece from Q1 2011 are provisional
Figure 1 Growth of real GDP (% p.a.)
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The UK balance of payments
UK public sector net debt
Figure 5 shows the components of the UK balance of payments since
2000, expressed as a percentage of GDP. The balance of payments
summarises transactions between the UK and the rest of the world,
and is subdivided into three separate accounts:
• the current account (showing transactions in goods and services
and flows of income and transfers)
• the capital account (showing changes in the ownership of physical
assets)
• the financial account (showing transactions in financial assets)
The overall balance of payments must always be zero, and the figure
shows that the normal picture is for a deficit on current account to be
offset by a surplus on the financial account.
As the financial crisis hit, the authorities needed to step in to bail out
banks that were considered to be too big to be allowed to fail. This
led to the huge increase in public sector net debt shown in Figure 6.
6
4
2
0
Time
–4
Figure 2 The unemployment rate in the UK since 2000
Economic Review September 2015
Source: ONS
Figure 5 Components of the UK balance of payments
www.hoddereducation.co.uk/economicreview
2014
2013
Current
2012
2011
2010
Capital
2009
2008
Financial
2007
2005
2004
2003
2002
Errors and omissions
2006
–6
–8
2001
Time
Source: ONS
Excluding financial
sector interventions
Including financial
sector interventions
40%
Figure 6 Public sector net debt in the UK (as % of GDP)
–2
ILO
Claimant
160
140
120
100
80
60
40
20
0
Source: ONS
2000
2014 Q2
Time
9
8
7
6
5
4
3
2
1
0
2000 Q1
2000 Q4
2001 Q3
2002 Q2
2003 Q1
2003 Q4
2004 Q3
2005 Q2
2006 Q1
2006 Q4
2007 Q3
2008 Q2
2009 Q1
2009 Q4
2010 Q3
2011 Q2
2012 Q1
2012 Q4
2013 Q3
2014 Q2
Source: data from OECD (2015), Quarterly GDP (indicator), doi: 10.1787/
b86d1fc8-en (accessed on 31 March 2015)
2014 Q1
2013 Q3
2013 Q1
2012 Q3
2012 Q1
2011 Q3
2011 Q1
2010 Q3
2010 Q1
2009 Q3
2009 Q1
2008 Q3
2008 Q1
2007 Q3
EU 18
Germany
Greece
UK
USA
2007 Q1
% change on same quarter
of previous year
8
6
4
2
0
–2
–4
–6
–8
–10
–12
Figure 4 The rate of change of consumer prices since 1920
1997 Q1
1998 Q1
1999 Q1
2000 Q1
2001 Q1
2002 Q1
2003 Q1
2004 Q1
2005 Q1
2006 Q1
2007 Q1
2008 Q1
2009 Q1
2010 Q1
2011 Q1
2012 Q1
2013 Q1
2014 Q1
Economic growth (the annual change in real GDP) is a key indicator
for any country, as it shows how the volume of output being
produced changes through time. Figure 1 shows recent experience
for selected countries. The recession of the late 2000s is very clear,
as is the slow recovery for most countries. The prolonged recession in
Greece is also apparent.
Source: Hills, S., Thomas, R. and Dimsdale, N. (2015) ‘Three Centuries of Data:
Version 2.1’, Bank of England
Figure 3 Inflation and bank rate
% of GDP
Unemployment since 2000
% of workforce
(seasonally adjusted)
GDP growth
1920
1924
1928
1932
1936
1940
1944
1948
1952
1956
1960
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
2008
2012
7
30
25
20
15
10
5
0
–5
–10
–15
–20
% change in CPI
% change in CPI on same month
of previous year, bank rate (%)
How well is the UK economy
performing? Here Peter Smith presents
key data covering some of the most
important indicators. For help in reading
the data shown in the figures, see the
Quantitative Skills column on pages
18–19 of this issue of Economic Review
Inflation and bank rate since 2004
% of GDP
UK economic
performance
Year
EconomicReviewExtras
Go online for a printable pdf of this centre spread
(www.hoddereducation.co.uk/economicreviewextras).
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