OECD Downgrades UK Growth Forecast as Unemployment Rate Hits 17-year High

The OECD yesterday downgraded UK growth forecast saying "economic growth will be subdued this year and next...". Adding "the government must continue its difficult fiscal consolidation and structual reform programmes to return the economy to a sustainable path.

The OECD also said that the "spending cuts will curb government consumption, investment and household growth throughout 2011-2012. However on a positive not the OECD went on to say that this would bring long-term gain. 

"The OECD says that pushing through key reforms will address fiscal sustainability concerns and help bring about a long-term rebalancing of the UK economy. 

 1. The shaded area indicates the maximum and the minimum among the seven major OECD countries.
Source: OECD, OECD Economic Outlook database.


As can be seen by this data chart from the OECD, the UK GDP growth lags significantly behind its OECD counterparts. Furthermore CPI inflation will also have a negative impact on the consumer going forward as companies will continue to push prices onto its customers. Not to mention soaring oil prices, which will further dent consumer confidence as they cut spending in other areas as they spend more money at the pump.
On the plus side for the UK economy, is that the current unemployment rate stands at 8% slightly below the OECD average. Yesterday, however saw the UK unemployment rate hit a 17-year high after an increase in unemployment of 27,000 in January to 2.53million. Oddly on the same day the ONS released figures showing that the number of people claiming jobseeker's allowance fell by 10,200 to 1.45 million.

OECD Report on the UK Economy