The UK will continue on a long, slow road to recovery, the Bank of England said today.
Cutting its growth forecast for 2013 to 1%, the central bank predicted that the recovery from the financial crisis and double-dip recession will be “slow and protracted” and inflation will stay higher than previously expected.
Official figures released yesterday revealed that UK inflation rose to 2.7% in October, from 2.2% in the previous month, on the back of higher university tuition fees and food prices.
In its Inflation Report for November 2012, released this morning, the Bank of England said that CPI inflation has been well above the 2% target for much of the past two years because of increases in energy and other import prices and in VAT.
In fact, the UK economy has barely grown during this period as a result of the financial crisis and its impact on global demand, a squeeze in domestic spending power as well as the necessary fiscal consolidation. Moreover, the period of weak demand has been accompanied by stagnant productivity and this raises questions about the extent to which the supply capacity of the economy has expanded, the report said.
The Bank’s Monetary Policy Committee foresees a sustained, but slow, recovery for the UK economy and in the near term inflation is expected to be higher than thought likely in August. Inflation is seen falling back towards the 2% target in the second half of next year, which is later than previously estimated.
Separately today, unemployment figures released by the Office for National Statistics show that unemployment across the UK has fallen to its lowest total for more than a year and youth unemployment is below one million again, although the number of people claiming Jobseeker’s Allowance rose by 10,100 in October 2012 to 1.58 million.
Overall, the number of people out of work decreased by 49,000 to 2.51 million in July to September 2012. This takes the unemployment rate to 7.8%, down 0.2 percentage points compared with April to June.
There were 29.58 million people aged 16 and over in work in the three months to September, an increase of 100,000 from the previous three months.