Inflation in the UK has declined notably in 2020, yet economic growth continues to evade

Amid a backdrop of diminishing UK inflation, the economy appears to be growing increasingly weak. On November 10, 2023, a pedestrian was seen walking in the City of London, shielding themselves from the rain with an umbrella. Data released on Friday revealed that Britain's economy had stagnated during the third quarter, a result of the high inflation and interest-rates hikes.

A city with a long and rich history, London is the latest to be featured by CNN. In October, UK inflation experienced a dramatic decrease, hitting its lowest point in two years. This allowed PM Rishi Sunak to proudly proclaim that his objective to reduce the rate of inflation had been fulfilled.

 However, analysts have expressed concerns about the substantial expenses that businesses and households still have to pay, and the sluggish state of the economy, as well as the fact that Chancellor Sunak's commitment to foster growth is still a long way off.

 On Wednesday, the Office for National Statistics reported that consumer prices had risen by 4.6% compared to figures from the previous year, which had seen a higher 6.7% in the month of September. This deceleration was mainly caused by a large decrease in energy costs for households due to the lower cost of natural gas in the wholesale market.

October saw a drop to 10.1%, the lowest level of food inflation in over a year, due to a slower rise in food prices.

 In a post on X, Rishi Sunak stated that he had successfully achieved his goal of halving inflation, which he set in January.

 As the hardship persists for numerous individuals, it is important to remain steadfast in our efforts to bring inflation back to its desired level.

 Despite the inflation figures, Gary Smith, the general secretary of GMB labor union, noted that they would provide little solace for those battling to make ends meet.

 Cheers this morning over a synthetic objective appear to be out of touch from a government that damaged the economy and left countless individuals with unaffordable expenses," he continued in a proclamation.

 The Bank of England, having control over the interest rates used to control prices, aims to maintain an inflation rate of only 2%. Therefore, there needs to be a significant decrease in inflation.

 Andrew Bailey, the Governor of the central bank, recently warned that inflation is too high, and thus the bank has increased interest rates to a level that has not been seen in over 15 years in an effort to control prices.

 Economists were not content with just looking at the top-line figure and noted that the underlying cost pressures, such as wages and services, were still in existence. In particular, the cost of services was 6.6%, which was lower than before but still considerable.

 Alex Veitch, director of policy at the British Chambers of Commerce, expressed his concern that prices remain distressingly high for customers. He went on to state that businesses are struggling to invest due to the issues of high rates of interest, lack of skills and a difficult economic landscape.

Economic immobility

The economy has been unable to make any progress, remaining stuck in the same place. January saw inflation at an elevated rate above 10%, yet it has since dropped; Chancellor Sunak's promise to the public to reinvigorate the economy is becoming more and more of an unattainable objective.

The Office for National Statistics reported that the UK's GDP showed no expansion in the quarter ending September, in contrast to the three-month period ahead when the GDP only increased by 0.2%.

Julien Lafargue, chief market strategist at Barclays Private Bank, commented that the UK economy is still in a period of stagflation and the outlook is not likely to improve in the near future. This term describes a mixture of high inflation and sluggish, or no, economic growth.

The UK economy has been in a state of stagnation for the past few months, with the property market being significantly impacted by the slowdown. This has caused a significant disruption in the financial sector, as well as other related industries. The effects of this stagnation have been seen across the country, and as a result, the housing market has been hit particularly hard. The lack of movement in the property market has caused a decrease in investments, and this has had a direct effect on the economy. 

The UK has experienced its least productive quarter in twelve months, with the real estate sector experiencing a downturn. This has been referred to as the "Stagnation Nation".

A NatWest survey revealed that the majority of the UK experienced a decline in business activity last month as a result of the high interest rates creating tension on the economy. This was due to a general deficiency in the demand for products and services.

In October, Accenture and S&P Global conducted a survey of businesses in the manufacturing and services sectors and discovered that UK business confidence had dropped to its lowest point of the year. See here for more information.

 On Monday, Ewan Mackay of Accenture in the UK and Ireland commented that, despite milder inflation, higher costs of living and interest rates appear to have reduced the beneficial effects of this situation.

 At the upcoming midterm budget, British Chancellor of the Exchequer Jeremy Hunt is expected to present the government's taxation and expenditure policies. According to Adam Veitch of the British Chambers of Commerce, the Autumn Statement provides the government with a chance to outline a comprehensive plan for economic growth.

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