UK economy is in recession

B.Retained economy I need to be more productive, but first I have to get through the winter. A big problem is the rising cost of living. Last week, the Bank of England projected annual inflation for October of this year to be just above his 13%. At least half of this increase is mainly due to skyrocketing energy prices due to the war in Ukraine. Consultancy Cornwall Insight estimates that the average annual household utility bill has already risen significantly year-on-year from £1,971 ($2,380) today, and will hit a spectacular It has been suggested that it may increase to 4,427 pounds.

Analysis by imf It suggests that the poor in the UK are particularly exposed to this price shock as they tend to spend a larger share of their budgets on energy than the rich. The issue dominates the race between Rishi Sunak and Liz Truss to become the next leader of the Conservative Party. But Squeeze is affecting more than the most vulnerable. Of her 89% of adults who said their cost of living had increased, 62% said they had already reduced their non-essential spending, and more than half had reduced their energy use at home.

As British politicians fight over who to help and how, the Bank of England is taking action to ensure today’s high inflation rate isn’t in the system. On August 4th he raised interest rates by half a percentage point. This is his biggest ascent in 27 years and his sixth consecutive ascent. This is pushing up mortgage prices and the return to savings is not as fast (see Bagehot).

Banks predict households will suffer the biggest drop in living standards in decades. After-tax labor income is expected to decline in real terms by more than 4% per annum next year. We also expect a prolonged recession. The upcoming recession will be shallower than that caused by the global financial crisis and pandemic, but it bodes ill for the UK’s ability to emerge from its long-term economic stagnation. and the cost of living crisis will dominate government agendas for months. The use of political energy is also important.

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