Is UK Economy on the Road to Recovery?

The past week has seemed to have brought with it vastly optimistic news for the UK regarding progress within the economy. This suggests that the country is finally recovering from a prolonged slump in the economic cycle, after being faced with a double-dip recession.

A macroeconomic objective that is currently being met within the UK is price stability. The UK is currently within it's target of a 2% rate of inflation, plus or minus 1%. Households can celebrate a fall of inflation, from 2.7% in September to 2.2% in October. This is a measure of the consumer price index (CPI- a measure of changes in price of a representative basket of consumer goods and services).

It was forecast for the inflation rate to be at 2.5%, but fell below this. The largest spur in this decline in the rate of inflation was the fall of transport costs by 1.5% between September and October, which occurred as a result of falling fuel prices. There has also been a fall in the rate of inflation in both education and food costs. However, the relief felt by households is likely to be short lived, as price rises by energy firms have yet to take affect on inflation rates.

Another key economic indicator is the level of unemployment.The unemployment rate of the UK has fallen by 0.2% to 7.6%, the lowest rate in over three years. This brings the rate closer to the 7%, which is the level at which the Bank of England has said it will not consider raising interest rates from 0.5% until the employment rate falls below this 7%. Reaching this rate does not guarantee an automatic change of interest rates. As interest rates are used to control inflation, there is currently no obvious pressure for an interest rate rise.

The governor of the Bank of England, Mark Carney says that the UK recovery has "taken hold" and that unemployment will fall sooner than it had forecast. Annual economic growth is expected to be 2.8%, rather than the 2.5% that was predicted in August. Could it be that after the high levels of economic hardship that have been felt in the UK since the financial crisis of 2008, that finally the country has pulled itself together and is on the road to recovery? It is progress over the next few months that is likely to determine whether or not things are being to look up for firms and households of the UK.