The economic situation at the beginning of 2014 has changed markedly since the beginning of 2013. A year ago, the UK was thought to have experienced a double dip recession and was facing the prospect of a triple dip recession. Subsequent data revisions from the ONS have uprated previous estimates of quarterly GDP figures and it is now clear that there was no double dip recession. Moreover, the second half of 2013 saw strong GDP figures with both quarters reporting 0.8% growth. The Bank of England, the Office for Budget Responsibility and many others forecast that this strong run of data will continue into 2014. David Kern, Chief Economist at the British Chambers of Commerce expects GDP in Q4 2013 to have grown by an even stronger 0.9%. Another strong GDP figure will add to Government claims that the recovery is under way and will increase pressure on Labour to come up with a clear economic policy.
Employment grew strongly throughout 2013 despite the continued 6 year stagnation in productivity. Even with relatively robust output growth, productivity fell again in Q3 2013. Whilst labour market improvements are to be welcomed, the weakness of productivity raises concerns about the durability of the recovery. Furthermore, excessively loose monetary policy may now be preventing more sustained productivity growth and generating future problems.