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Rise In UK Leading Indicator

James Boston
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The UK’s Conference Board has just released it’s Leading Indicator for the month of June, this broad measurement of economic activity within the economy is now reading at 0.6%, this represents a slight rise on the May figure of 0.5%.

The Bank of England (BoE) last week held out on raising the UK Base Rate at it’s scheduled Monetary Policy Committee meeting, there had been some limited speculation that the Bank would begin a cycle of monetary tightening in light of further upward revisions in the country’s growth forecasts. In reality it will most likely be towards the end of this year or early next year before any definitive action is seen from the BoE, despite GDP expansion now being predicted at 3% for 2014 there still appears to be some slack in the UK economy, a recent Bloomberg poll estimates this slack to be in the region of 1% to 1.5% of GDP.

There are two areas of the British economy that are still benefiting from the maintenance of the low base interest rate. Firstly, the industrial sector is still a long way from performing at capacity, there has been some welcome pick up in this area over the past few month’s but it is still lagging behind other sectors in this recovery, there is no real question mark over the likelihood of a full recovery in the manufacturing sector however this still needs time catch up due to underinvestment during the early stages of this economic cycle.

The second area of concern for the British economic authorities is the geographical asymmetry that is a feature of this recovery. The northern part of the country is proving slow to benefit from the current stage of British prosperity. The north of England is particularly lagging, and to a lesser extent so too is Scotland, this latter point is crucial as it is important that Scotland feels some economic advantages in the run up to next month’s referendum on whether to break away from the UK.

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