UK economic outlook: stagnation

27 July 2012

Post financial crisis, the dynamics of the UK economy have been reset, as consumers shun credit-fuelled expenditure – the latest GDP data for Q2 2012, confirming the ‘technical’ recession, reinforces our view of an economy moving sideways rather than recovering.

Household consumption in real terms has been in moderate decline since Q4 2010, on real disposable income declines, in turn due to a combination of weak nominal earnings growth due to flat productivity growth, and high inflation.

Although inflation has decelerated markedly in 2012, we continue to expect household consumption to exhibit little meaningful growth for the foreseeable future, which in turn can only be bad news for media and telecoms companies.

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