The missing GDP (UK edit)

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FTAlphaville had a post yesterday about ‘missing GDP' in the US. A couple of key points to note were:

  • the main reason for a slower-than-average recovery is weak consumer spending
  • exports have outperformed so far, but this may not continue as they are vulnerable to global growth

This is not so far from the UK's position, either. The graph below shows total GDP growth, which has lagged behind previous recessions...

...But, as the next graph shows, if we exclude household spending, a different pattern emerges, with growth at a roughly similar pace to that following previous recessions.

Given the weakness in the labour market, and households' desire to pay down debts, this will not come as a surprise. It is also unlikely that household spending will improve much this year.

Although GfK NOP's consumer confidence indicator moved up to a six-month high today, it remains subdued by long-term standards, and there is little indication so far that this has translated into increased spending. However, whilst subdued consumption clearly reflects a degree of economic stress, ‘rebalancing' the economy does require less growth coming from household spending, and more growth from exports and investment.

In the UK exports have continued to grow but, as FTAlphaville point out, they are particularly vulnerable to global growth. The UK's exposure to the Eurozone is therefore a key issue for the year ahead.

However, UK manufacturers – who account for around half of total exports – are relatively positive about their export potential in the year ahead. As our Executive Survey showed, over four fifths of manufacturers expect export sales to be the same or greater in the year ahead. Key to this, UK manufacturers are targeting non-traditional markets, seeking out the new growth opportunities that exist there.


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