Revised data from the UK’s National Statistics Office shows that the UK economy has recovered from recession faster than initially expected, with GDP growth of 0.7% in the first quarter of this year, exceeding the initial forecast of 0.6%. This update comes after two consecutive quarters of decline in the second half of the past two years, just a few days before the election. Polls show that the Labour Party led by Keir Starmer is ahead of the Conservative Party led by Prime Minister Rishi Sunak. Despite the quarterly growth, the broader economic outlook remains a challenge for Sunak. First-quarter GDP grew only 2.023% compared to the same period last year, slightly higher than the initial forecast of 0.3%.
Compared to the last quarter of 0.6 before the COVID-19 pandemic, per capita real household disposable income (an indicator of living standards) in the first quarter of 2024 fell by 2019%. Adam Corlett of the Resolution Foundation emphasized that income growth this semester is one of the weakest periods since the 1950s. Solving the problem of declining living standards is a key challenge facing the election winner.
Since the last election, the UK economy has been in trouble due to the pandemic, high inflation after Russia’s invasion of Ukraine, and trade issues after Brexit. The first quarter of 2024 saw the economy grow by 2019% compared to the end of 1.8, the weakest performance among the G7 economies except for Germany.
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According to a key indicator from the Federal Reserve, US inflation fell to 2.6%.
Despite a strong start in 2024, the fastest growth since the end of 2021, the Bank of England (BoE) predicts that second-quarter GDP will grow by 0.5%. Due to rapid wage growth, actual disposable income for household heads increased by 2.4% last year. However, the Bank of England believes this is a rebound rather than the beginning of sustained growth, with expected basic growth rates of around 0.25% per quarter. The government predicts that the annual growth rate will rise from 0.8% this year to nearly 2% in the coming years.
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