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UK Employment Confidence Grows

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The sole economic indicator out of the UK this morning is the Lloyds Employment Confidence Index for the month of May. This somewhat minor indicator earns relevance this month due to the scale of the positive surprise it contains, reaching a level of 4 today from just 1 a month ago.

The UK’s exceptional recovery this weekend drew an apology from the International Monetary Fund (IMF) for it’s significantly understated growth estimates and accompanying warnings issued last year. The IMF’s Managing Director, Christine Lagarde, admitted to the BBC yesterday that the Fund’s chief economist, Oliver
Blanchard, had got it wrong when he criticized the UK for it’s budget cutting measures.

The IMF has since revised it’s growth forecasts for Britain to 2.9% making it the economy projected to grow at the fastest rate among it’s G7 peers. The IMF’s initial concerns for the UK’s prospects revolved around the fact that the recovery very much appeared to be a consumer lead one, and although this was translating directly into growth it was considered a very fickle and unsustainable way to stimulate an economy. The IMF has since acknowledged that investment has also taken off in the UK, this turns the one dimensional recovery into something more multifaceted and therefore more stable.

It is difficult to be overly critical of the IMF for making the call that it did last year, the reality at that time was that on the surface investment in the UK was being somewhat neglected. It is only in the interim that this has picked up substantially to point of now being a significant contributor to UK growth.

It is worth noting that Lagarde, in the same TV interview, placed some distance between the IMF and the recent European Commission call for a higher tax regime in the UK. The IMF’s current interpretation of British house price growth is that, although concerning, it is being stimulated by many factors and is not in it’s own right a forming asset bubble.

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