hi everyone this is the big one for your macro exams this year covering core UK economy stats in 2023 your job is to take down all these stats to sprinkle them in your macro essays but also to use this information to weigh up arguments that you're making it's a way to score even higher marks and push towards the top grades but this video is so important please do me a favor and share it with anybody you think is going to benefit your friends other students yes but also just generally people who are interested in how the UK economy is doing this information is so important to know the UK economy in stats crucial at the moment so please share this video to anybody that you think will benefit and note that this video is one in my revision for 2023 exams playlist many other videos have been uploaded already many more to come videos geared towards making you perfect in Eurovision ready for your exams this year so great you're watching this one then make sure you're watching all the others in that playlist too so let's get into it starting by looking at economic growth in the UK What annual growth in 2022 is 4.1 percent a healthy figure following a 7.6 growth rate in 2021 but bear in mind the UK was coming out of its worst recession in over 300 years in 2020 the UK economy contracted by 11 so high growth rates in 2021 2022 but coming from a very low base still a strong recovery more disappointing is our current growth figures you can see that in quarter four of 2022 the UK economy only grew by 0.1 percent but far more concerning is our annual growth forecast for this year we are forecast to shrink by 0.2 percent yes we have very high inflation eating in to cost of living massively rising cost of living driven by supply-side shocks initially very high oil prices more recently high gas electricity prices and very high food prices are those supply-side shocks really eating into the cost of living harming economic growth and on the demand side low consumer confidence low business confidence affecting consumption and investment but also contractionary demand side policies contractionary fiscal contractionary monetary policies these are all reasons why this year our economy is forecast to shrink together with Germany we are the only major economies forecast to shrink this year not looking good on the growth side at all hence why we're expected to have a large negative output Gap later this year we already are in a negative out of the Gap situation but that is the projected Peak a negative output gap of 1.6 percent how is that percentage formulated well this is actual GDP as a percentage of potential GDP so we've actually had a positive output gap for the last two years um supply side constraints very high demand a tight labor market has driven a positive outbreak out but all of those conditions are now easing supply side constraints are easing waning demand a loosening labor market is why we have a negative output Gap and then it's projected to rise good to know that peaking at this figure by quarter three of this year our GDP per capita that is average income per head per person is 33 000 pounds our total GDP is around 2.4 trillion pounds but good to know the breakdown 79 of that is from the services sector 14 from manufacturing six percent construction one percent agricultures who are a very Services dominated economy unbalanced growth in that regard let's now move to unemployment the unemployment rate in the UK is quite low at 3.8 percent a sign of a labor market working quite well a labor market that's quite resilient but this is a lagging indicator with negative growth rates forecast this year a larger negative outper Gap as well we're expecting this figure to rise and to Peak at something like four and a half percent later in the year the employment rate that's those people of a working age who are in work is 75.8 more interesting is the economic inactivity rate this is people of a working age so age between 16 and 64 years old who are either not willing to work not physically able to work or who are not seeking work that figure is 21.4 a figure that's risen during covert times driven mainly by those people in their 50s and 60s who have not returned back to the workforce since the covid pandemic there have been targeted supply-side policies used to try and bring these guys back but as it stands that figure has risen a good figure to know that youth unemployment has come well down to 10.8 percent that figure peaked at 14.5 at the heart of the covid crisis but a strong service is rebound as well as targeted policies to bring this figure down have been quite effective hence why the figure is quite low now long-term unemployment that's those people who have been out of work for a year or more is very lower only one percent very healthy figure there wage growth in the UK annual wage is growing by 6.6 again a good sign of a labor market working quite well a sign that a tight labor market we once had fed through to quite stubbornly High wage growth we've known that trade unions in the UK have been very very strong striking demanding significant increases in their pay but just more generally especially in the private sector wage growth has been very very healthy having said that still below the rate of inflation so in real terms wages are still negative hence why consumer confidence is very low high inflation significantly rise in cost of living negative growth rates forecast Rising unemployment forecast is all eating into very low consumer confidence there are signs fragile signs that there is a small recovery coming in consumer confidence but it's too early to guarantee that very low is really where we are at the moment to be honest and job vacancies a sign here the labor market is loosening we had a record high number of job vacancies last year in a very tight labor market but unemployment Rising we're expecting that means job vacancies are now coming down firms are less willing to hire with negative growth rates forecasts with generally waning demand in the UK so we're already seeing job vacancies falling at the moment representing a looser labor market now let's move to inflation shall we inflation is super scary in the UK economy at the moment you can see that the inflation rate is 10.1 percent using the CPI measure Way Beyond the target rate of 2 in fact this is our seventh consecutive month of double-digit inflation it is unbelievable how scary these figures have been uh what's been driving it well mainly supply side drivers in 2021 very high oil prices driving up fuel prices throughout 2022 and now high gas and electricity prices High food prices also are a major driver at the moment but also strong wage growth and a weak pound these are all major supply side drivers keeping inflation stubbornly high and sticky inflation High inflation is not unique to the UK in the Eurozone at the moment 6.9 percent five percent in the US it's been much higher in both economies but you can see the UK is now the outlier with still double digit High rates of inflation inflation that's disproportionately harming those on low incomes it is a scary picture fortunately for Casa for this to come down later in the air some forecasts are quite bullish saying it can come down all the way to around three percent but the vast majority here is saying around half so inflation somewhere between five and six percent later in the year still above Target but thank God if it does end up coming down good to know some other stats at the heart of inflation as well like for example core inflation this is the Bank of England's preferred measure of inflation it's basically the CPI but taking out food and energy from the basket so specifically food gas electricity and fuel very price volatile items you're then left with the core inflation rate which economists call the underlying rate of inflation the general Rising price of consumer goods and services across the economy and you can see this is 6.2 percent worrying here far beyond the two percent Target rate which tells you that generally consumer goods and services are rising a lot in price but the fact that the CPI inflation rate is greater is telling you that it's food and its energy really at the heart driving inflation currently now to produce a price inflation what is this this measures the change in price of a basket of goods as they've been manufactured as they leave the factory gate this is wholesale price inflation it's one stage before retail price inflation I.E one stage before CPI inflation rates and the idea is if this figure is rising it's an indicator of rising input costs for firms Rising raw material costs Rising labor costs Rising energy costs for example um for two years this figure has been consistently higher than the CPI inflation rate it's an indicator of future CPI inflation rates if the figure is higher than the CPI we expect CPI inflation rates to go up right retail prices will rise to reflect higher input costs for firms but for once for once this figure is now below the CPI inflation rate for two years it's been above driving increases in the CPI finally it's lower maybe CPI inflation will start to come down for once this figure is guiding us saying CPI inflation rate could well come down given that it's lower than the CPI and might go down further currently at 8.7 and that is a great thing inflation is very scary at the moment any signs that it can come down is a very very welcome sign inflation expectations important figure here what households think inflation will be over the next 12 months 5.4 percent okay an important figure because that drives wage growth even though that is lower again a good sign it's still be on target if wages continue to rise stubbornly greater than Target that is concerning but at least that figure is lower wage growth we know is quite strong 6.6 but negative in real terms food price inflation very high at 19.1 percent a major driver of high inflation at the moment and again the disproportionate impact on low-income households is very concerning so General picture inflation a massive concern for better signs maybe that inflation will be coming down it better come down otherwise a major risk is of inflation spirals who would have thought that in the UK economy but that's where we are at the moment let's move now trade the UK's current account deficit is 3.3 percent of GDP in size the UK has had a current account deficit for the last three decades the decade-long average is around four percent of GDP and we're pretty much there again so a higher persistent current account deficit in the UK driven by heavy dominance supply side factors like high unit labor costs given very poor productivity and weak business investment that erodes export competitiveness investment has been awful ever since we voted brexit in 2016 and productivity shocking since the financial crisis UK productivity is 20 below the average of the rest of the G7 the G7 the seven largest most advanced economies in the world the UK's productivity is 20 below the average of the rest of the G7 shocking there but also since the financial crisis UK productivity is 25 below the pre-financial crisis Trend a couple of stats that tell you just how bad product in it is both of these drive up cost of production and erode export competitiveness at the heart of our current account deficit the pound very weak to the dollar 1.24 to the euro one Euro 12 the pound has been weak ever since brexit in 2016 but you might be thinking surely that's a good thing a weak pound or a weak exchange rate should improve the current account deficit will generally yes but in the UK's case the UK is a net importing country and an importer of key necessity inputs like for example raw materials like semi-finished because Capital Machinery so a wheat pound simply makes those Imports more expensive and worsens our current account position we also know the wheat pound is a key driver of stubbornly high inflation in the UK too so we pound is causing more damage in the UK it's not really helping to improve our current account position minimum wages stands at 10 pounds 42 per hour in the UK right now a figure that's risen far more than inflation another reason why uh competitiveness is low Unilever costs are high and what about the performance of our major trading partners the U.S and Eurozone economies well both of those economies are forecast to slow down considerably with growth this year bad news for UK export demand there as well let's now move on and talk about government finances or government finances in the UK are in terrible shape a projected budget deficit for the fiscal year 2020 to 2023 is 6.1 percent of GDP remember a budget deficit is annual government borrowing and a fiscal year in the UK is from the first week of April one year through to the first week of April the following year projected to be 6.1 percent of GDP in the fiscal year just gone coming off two very high figures in the Years prior 14.5 percent of GDP budget deficit at the heart of the covet crisis 2020 to 2021 around 305 billion pounds worth of and borrowing in that one fiscal year the highest budget deficit since World War II in the UK following that 5.6 of GDP so very high figures these last two is government borrowing of well in excess of 100 billion pounds for some context the fiscal year prior to covid the UK's budget deficit was around two percent of GDP 40 billion pounds worth of borrowing and go back to the financial crisis the peak budget deficit then was a hundred billion pounds so you can see we are well in excess of that eye-watering sums of government borrowing here no wonder that we're currently in the process of using contractionary fiscal policy to run down these figures but High borrowing has meant a very high national debt national debt is the total stock of government debt currently a hundred percent of GDP prior to covert it was around 79 or 80 of GDP bond yields reflect the cost of borrowing for the government this figure has risen in line with generally higher interest rates in the UK 3.46 meaning it's more expensive now for governments to service their debt to pay debt interest in fact this year 2023 the forecast is for the UK government to pay 116 billion pounds just on servicing debt interest my God what an opportunity cost that is more than our government spends on any public service barring the NHS it's more than our government spends on education for God's sake insane to think about it and yes that's why we're using contractionary fiscal policy to run down our budget deficits to run down the national debt the main way we're doing that is by raising taxes so income tax for example is rising let's talk about income tax we have a progressive income tax system in the UK where the first 12 570 pounds worth of income is tax free that is the income tax free allowance from 12 570 up to 50 270 pounds worth of income that's a 20 tax rate on any income between 50 to 70 and 150 000 pounds 40 tax rate and any income earned above 150 000 pounds is taxed at forty five percent but interesting is that these tax spans have been Frozen all the way to April 2028 that is a massive tax rise not explicitly but by stealth the idea is that every year people's pay goes up let's say in line with inflation only so in real terms people aren't better off their pay rise is simply in line with inflation but if the tax spans in this tax system are frozen they could easily be dragged into higher income tax bans making them pay higher rates of income tax and that's actually they end up being worse off this is the phenomenon of fiscal drag and by freezing the tax spans all the way to 2028 this is fiscal drag on steroids isn't it massive fiscal drag here horrible news for workers at the time of a cost to living crisis makes them even more worse off but great news for the government just freezing the tax spans to 2028 is expected to earn the government by 2026 around 26 billion pounds a year more income tax revenue incredible to think about it isn't it corporation tax has also risen as of April this year from 19 now to 25 a significant Direct Tax rise there vat currently 20 in the UK and on Genie coefficient 0.343 an indicator of income inequality good to have those down let's finish this video by talking about interest rates well the bank of England base rate currently stands at 4.25 a figure that's risen all the way from 0.1 in December 2021 so all throughout 2022 pretty much all throughout 2023 interest rates have risen and they've risen a lot at a time too I'm expecting that figure to continue Rising uh higher interest rates are there to battle higher than tiger rates of inflation has it been working not at all because we know inflation is being driven by supply-side factors higher interest rates Target the demand side of the economy they don't help to alleviate supply side pressures so not working at all but the bank of England have to be seen to be doing something so they've been raising rates a lot we're expecting a bit more to come in the coming months too that has fed through to higher average lending rates by commercial Banks not surprising that the transmission mechanism of monetary policy is working well in the upwards Direction banks are generally very willing to lend despite higher interest rates causing some bank failures in the banking sector generally speaking banks are in a healthy position they are willing to lend but the bigger issue is that of consumer and business confidence both very very low at the moment however signs gentle signs of recovery tentative signs of recovery especially with business confidence brexit uncertainty seems to be fading away supply-side constraints are easing forecasts for lower inflation are helping as well but as we speak both very very low so consumers business is not very willing to borrow not very willing to spend not very willing to invest all uh big contributors to forecast negative growth rates this year in the UK savings ratio that is the proportion of disposable income that is saved and not spent pretty high for UK standards at 9.3 percent but not massively surprising right now a major cost of living crisis people naturally want to save just in case bills rise unexpectedly they then have savings to pay off those bills and lastly quantitative easing total amount of QE used in the UK 895 billion pounds that's around 40 percent of GDP insane really the last QE injection was during covert times 450 billion pounds of new money pumped into the UK economy definitely sow the seeds for inflation given how expansive that QE was so there you have it guys all the key UK economy stats for you to use in your macro exams this year hopefully you've taken all that in use it in your essays yes is application but hopefully the wider context here as well helps you to weigh up arguments in your essays to push you to the highest marks remember this is one video of many in my revision for 2023 exams playlist great you've watched this one watch the others too many more to come to help you smash your exams this year so thank you so much for watching I can't wait to see you in future videos see you then guys thank you