Amid recent news that the UK economy grew by 2.6% last year, there is a growing debate whether the UK economy has finally emerged from the deepest economic crisis in almost a century. A 2.6% rate of growth marks the fastest rate of growth in seven years, before the recession hit.
However, recent figures from the Office for National Statistics (ONS) suggests that there could potentially be deflationary pressures in the near future, with the Consumer Price Index (CPI- the measure of inflation) falling to 0.5% in December 2014, the lowest rate in fourteen years. Coupled with this is the below par growth rate of the economy in the last quarter of 2014, at 0.5%, a considerably lower rate than the previous three quarters in the year. These two indicators could suggest the UK’s economic is once again slowing.
These figures could simply be due to the uncertain political conditions both in the UK, Eurozone and internationally. Nancy Curtin, Chief Investment Officer at Close Brothers Asset Management, said the final quarter figure “hardly set the world alight, and it’s clear that [the economy] is slowing. There are clouds looming on the horizon, and the general election is the biggest of these. Investors don’t like uncertainty”.
Whether 2015 will be a successful year for the economy remains to be seen. Early indicators such as the CPI rate for January could point to growth or decline, but the 2.6% overall rate of growth for 2014 certainly builds a solid foundation for the UK’s continued recovery into 2015.