The UK has emerged from recession into a new era, with economic data trending upward and frequently delivering positive surprises. The UK economy is now showing signs of a steady recovery. Better-than-expected inflation data and a positive CBI Industrial Trends Survey have boosted the UK's economic outlook for 2014.
The UK's Consumer Price Index (CPI) annual rate fell by 0.1% to 2.1% in November, the lowest level since November 2009. The monthly CPI rose by 0.1% to 127.0 in November. The better-than-expected inflation data reflects a decline in food and transportation prices. There is evidence that inflationary pressure from public utilities is decreasing. Most of the inflationary pressure in the economy stems from the pricing sector, and there are clear signs that the authorities are taking a more robust approach to managing pricing in an effort to sustain the improvement in consumer spending.
The primary source of inflation in the UK economy is the housing market; while this factor is not included in the CPI, housing market costs are included in the Retail Price Index (RPI). The strong CBI Industrial Trends Survey indicates that the real economy has good momentum. Output growth and total orders have reached their highest levels since 1995. Driven by exports in chemicals, automobiles, and transport equipment, export orders have also seen significant growth. Market consensus suggests that, despite slow growth, industrial output levels will continue to rise over the next three months, as finished goods inventories have remained below average for four consecutive months. The survey supports the view that the UK's GDP growth rate for the fourth quarter will reach 1%.