OECD Says UK Growth Has Improved But Challenges Remain

Despite what’s been going on elsewhere, the growth prospects for the UK have been improving steadily during 2013. The Organisation for Economic Co-operation and Development in Paris is the latest body to note that activity will be stronger in 2014 than previously envisaged. Growth of 2.4% next year, if achieved, would be the strongest since 2007.

The improvement in the UK outlook is entirely due to a pick-up in the domestic economy, fostered by the Bank of England’s cheap money policy, the Help to Buy boost to the housing market, the willingness of consumers to run down their savings to fund spending, and a slowdown in austerity to reflect weaker growth over the last couple of years. If anything, events in the rest of the global economy are hindering rather than helping the UK.

The OECD has concerns about policy gridlock in Washington, about the impact on emerging economies of the gradual withdrawal of the Federal Reserve’s bond-buying stimulus programme, and of the threat that the euro area could become the new Japan, locked into a vortex of deflation and rocketing public debt.

Indeed, the strongest words in the thinktank’s half-yearly snapshot of the global economy are reserved for European policymakers. The OECD calls on Germany to do more to help the struggling members of the euro area to grow faster by liberalising its services sector. Even more provocatively, the OECD says the European Central Bank should consider supplementing low interest rates with its own version of quantitative easing – buying bonds to drive down long-term interest rates.

via theguardian.com

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza