The United Kingdom saw growth in the second quarter and its exchange traded fund (ETF) is up in the last month. The question now is: can it last?
The United Kingdom grew 1.1% in the second quarter, the fastest pace in four years. That’s the good news. The bad news is that a research group feels that the growth was a mere “blip.” That has the government undecided as to whether the economy faces inflation or needs more of a stimulus to keep the tight budget sound, reports Scott Hamilton for Bloomberg BusinessWeek.
Many expect the Bank of England to tighten policy. According to The Wall Street Journal, U.K. economic growth for the year will outpace official estimates. But over the next couple years, the economy may remain weak because of a sharp reduction in government spending and tepid consumer spending. [ETFs for Euro Exposure.]
Some of the drag on growth from these two areas will likely be a direct result of the government’s emergency budget,which included slashing departmental budgets by up to 25% and raising the U.K. sales tax by 2.5% points to 20%. [New Leader in the U.K.; A New Leaf?]
Although the United Kingdom was once the trading power and financial center for Europe, the government has greatly reduced public ownership and contained the growth of social welfare programs over the past two years. The nation has large coal, natural gas, and oil resources, but its oil and natural gas reserves are declining and became a net importer of energy in 2005, according to the CIA Factbook.
Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance.
For more stories about United Kingdom, visit our United Kingdom category.
- iShares MSCI United Kingdom (NYSEArca: EWU)
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.