Spencer Dale argues that, contrary to a common perception, the support to growth over the past year provided by the lower level of sterling has not disappointed. Net trade has responded broadly in line with previous large exchange rate movements. Instead spending by companies has been surprisingly weak and, more importantly, household consumption fell sharply. He contends that “the surprising weakness in consumption stemmed largely from the sharp pickup in inflation over the past year, driven by increases in VAT, energy prices...and other import prices.” Therefore, not all of our disappointing growth performance over the past year can be laid at the door of the Euro crisis: other factors have been important.
Published on
13 December 2011
Press release