Is the UK still an economic outlier?

For much of this year, the UK has felt like an economic outlier. As the chart below shows, the inflation rate in the US and Euro area marched decisively downwards yet remained stubbornly high in the UK. Now, things finally seem to be moving in the right direction: at 6.8 per cent, UK inflation is far lower than its 11.1 per cent peak, and starting to close in on rates seen in other advanced economies.

Economic growth is also proving more resilient than expected. Just a year ago, the Bank of England released forecasts suggesting that the UK would enter an almost unprecedentedly long and deep recession. It didn’t materialise: recently released GDP figures showed that the UK economy grew by 0.2 per cent in the second quarter of the year — only a fraction slower than the eurozone. Then on 1 September came Office for National Statistics (ONS) data that upended received wisdom. Data previously showed that, as of the end of 2021, the UK economy was still smaller than it was pre-pandemic - a status that stood in contrast to all other G7 nations. But revisions made by the ONS now show the economy was in fact 0.6 per cent larger.