The latest economic report from the National Institute of
Economic and Social Research (NIESR) puts a realistic dampener on the economic ‘recovery’
for most workers.
They say workers will have to wait six more years before their
inflation-adjusted wages are back at pre-crisis levels. Average real wages are
still at 2004 levels and it will take until 2020 before they return to their
2009 peak. They also warn that the gradual rise in wages could take even longer
if Britain's productivity performance, which has been "abysmal" in
recent years, did not improve. This reinforces the warnings we highlighted last month when
the latest unemployment figures were released.
NIESR identify consumer spending as the main driver for growth,
which is expected to rise by 3.4% this year. This is largely a product of a
housing bubble, particularly in the south, encouraged by government schemes
such as Help to Buy. While average UK house prices will rise by 6.3% in 2014,
it is then expected to almost halve to 3.2% in 2015, and to between 0.5% and 1%
per year over the period 2016 to 2018.
This domestic growth masks poor export performance, as domestic
demand for UK and imported goods outweighs foreign demand for UK goods. NIESR
said; "In the near term, we expect the deficit on the UK's external trade
balance to widen."
They are not expecting any increase in interest rates, despite
better headline employment figures. That at least will be good news for house
owners.
Overall the report predicts global growth of 3.7% in 2014 and
2015 - an improvement on growth of 3.1% last year, "but still a sluggish
recovery by historical standards".
The legacy of austerity economics is clearly going to be with us for some time.
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