{"id":1317,"date":"2014-08-12T12:14:52","date_gmt":"2014-08-12T12:14:52","guid":{"rendered":"http:\/\/my-brains.co.uk\/jackross\/?p=1317"},"modified":"2014-08-12T12:14:52","modified_gmt":"2014-08-12T12:14:52","slug":"economic-update-august-2014","status":"publish","type":"post","link":"https:\/\/my-brains.co.uk\/jackross\/economic-update-august-2014\/","title":{"rendered":"Economic update: August 2014"},"content":{"rendered":"

This guide looks at key UK economic indicators and the economic prospects for the coming months.<\/em><\/p>\n

Following a period of faster than anticipated growth at the end of 2013, the economy has continued to strengthen with consistent growth throughout the first half of 2014.<\/p>\n

Gross domestic product (GDP) increased 0.8% in the second quarter of 2014 and was around 3.1% higher than the same period in 2013. The economy has grown for 6 consecutive quarters, the longest period of progress since the start of the economic downturn in 2008.<\/p>\n

This continued growth means Office for National Statistics (ONS) figures put GDP at 0.2% above its pre-recession high for the first time.<\/p>\n

However, weak productivity in the workforce and population increases mean that output per person is not predicted to exceed pre-recession levels until 2017.<\/p>\n

Industry growth<\/h3>\n

Services<\/strong>, which make up almost 80% of the entire UK economy, was the largest contributor to growth in Q2 2014, rising by 1% over the quarter and adding 0.77 percentage points to the increase in GDP.<\/p>\n

Production <\/strong>output increased by 0.4% in Q2 2014 thanks to rises in manufacturing (0.2%) and energy supply (4.7%).<\/p>\n

However, total production decreased by 0.7% between April 2014 and May 2014 including a 1.3% decrease in manufacturing. In the 3 months to June 2014, production was 11.3% below its Q1 2008 pre-downturn figure.<\/p>\n

Construction <\/strong>output rose by 1.2% (\u00a3113 million) in the month to April 2014 and 4.6% over the year. New work increased by 4.9% compared with April 2013, which the ONS attributed to strong increases in new housing and private industrial work. However, construction output decreased 0.5% in Q2 2014 and remains 10.7% below its Q1 2008 level.<\/p>\n

Investment growth<\/h3>\n

Since the end of the downturn, growth has been focused on household spending. However, in recent quarters investment growth has made a more significant contribution to overall GDP. In the first 3 months of 2014, household spending and investment both added 1.4 percentage points to GDP growth.<\/p>\n

The investment growth comes from a combination of business investment, which grew 10.6% in the year to Q1 2014, and investment in buildings such as houses.<\/p>\n

Houses and mortgages<\/h3>\n

The Halifax Price Index reveals that house prices in the 3 months to June 2014 were 8.8% higher compared to the same period in 2013.<\/p>\n

Looking at the longer-term picture, ONS figures show that house prices have recovered from the recession. In April 2014, the average house price was 6.5% higher than in January 2008.<\/p>\n

However, these figures are affected by significant rises in house prices in London. House prices in the capital were 31.6% above their January 2008 level in April 2014. In the rest of the UK, prices were 0.2% below their pre-downturn level.<\/p>\n

Mortgage lending<\/h3>\n

The rise in house prices has led to a rise in the share of high loan to income mortgages.<\/p>\n

The Bank of England\u2019s Financial Policy Committee (FPC) is concerned that if economic conditions change, this type of lending could potentially damage the banking system and jeopardise economic stability.<\/p>\n

To protect against risky lending and a significant rise in household debt, the FPC has recommended:<\/p>\n