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UK Leading Index Softens

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UK Leading Index Softens

The British Conference Board has just released this month Leading Economic Index. This is surprisingly soft given the strengthening pace of the British economic recovery, this months reading is 0.4% off slightly from a prior figure of 0.7%. The Leading Indicators tracks future trends of the overall economic activity in the UK and takes into account employment, average manufacturing workweek, initial claims, permits for new housing construction, stock prices and the yield curve. As such it is a very broad measure of the health of the British economy.

Ahead of this weekend’s International Monetary Fund (IMF) conference the Washington based organization issued an upgrade to British growth forecasts. The IMF’s quarterly bulletin, published yesterday, bestowed the largest forecast upgrade in developed economy growth to the UK. The 2014 projection for GDP growth was raised from 2.5% to 2.9% followed by a prediction of a further 2.5% growth rate in 2015.

IMF chief, Christine Lagarde, commended Britain on it’s pace of recovery but also sounded some cautious notes around the asymmetric nature of the economic pick up, she commented that currently the recovery is “predominantly driven by consumption” and stressed that the “UK has to export more, the UK has to invest more”. The advice from the IMF chief to Britain’s authorities is to “strengthen that growth going forward and make it three engines powered.”

There is no doubt respect in the UK for the economic advice and comment of the IMF, however last year the organization’s chief economist, Olivier Blanchard, publically criticized the British Chancellor, George Osbourne, as “playing with fire” over his harsh deficit reduction strategies. Osbourne is tonight scheduled to address the IMF in Washington and will take the opportunity to explain how his approach has contributed to the UK’s speedy recovery. It will be interesting however to note if he is in a position to outline policy to get the export and investment “engines” up and running.

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