The NIESR blog is a forum for Institute research staff to provide an informed, independent view on current economic issues and recent NIESR research. The views expressed here are those of the authors, and are not necessarily those of the Institute.
The Coronavirus pandemic has cast a dark cloud over UK economic prospects for the 2020s. The latest NIESR forecast suggests that GDP will not return to its 2019 level until 2023 or 2024. The Bank of England is more optimistic about the potential for the UK economy to bounce back but it is still not expecting the 2019 level of GDP to be exceeded until 2022. The Office for Budget Responsibility (OBR) central scenario is for a recovery somewhere between the NIESR and Bank projections.
The Covid-19 pandemic and extraordinary measures put in place to contain the spread of the virus have delivered a dramatic shock to the world economy. As the stringency of global lockdown measures gradually ease, an understanding of the short-term economic consequences of these measures is beginning to emerge.
Statistical agencies such as the Office for National Statistics (ONS) are responsible for collecting data on the prices of goods and services that we consumers purchase in order to calculate inflation. The ONS creates a representative ‘basket of goods’ that include the goods and services that households buy and consume most often. Historically, the prices for these goods and services would then be collected by dedicated price collectors each month, allowing the ONS to calculate the average price change between subsequent months.
Covid-19 and Brexit show that high speed internet is essential for growth
The CPILW for June 2020 is 1.1%, unchanged from 1.1% in May. This is 0.3% above the official CPIH of 0.8% and indicates that the official inflation measure CPIH understates inflation.
Will mass unemployment overshadow the U.K. outlook or will we be struck by the resilience in employment following a severe, yet short-lived, recession? Using the Beveridge curve to construct a baseline points to the unemployment rate rising sharply from 4% to 10% as the UK’s Covid-19 Job Retention Scheme (CJRS) unwinds in the second half of the year.
The CPILW for May 2020 is 1.1%, a slight fall from 1.2% in April. It is 0.4% above the official CPIH and indicates that the official inflation measure CPIH understates inflation.
Slavery was and is a pathology of economics. Our long-standing failure to reflect that has caused us to mishandle our foundational concept of “an economic agent”. Correcting that will not only secure the integrity of our discipline at its core but is also essential to for us to grasp exactly what is at stake in the earthquake now unfolding in the United States—and its global implications—after the murder of George Floyd, and to ponder what is to be done about it.
The government has introduced a number of new policy initiatives offering financial support to those who lost their jobs during the crisis. However, the policies have been costly, not comprehensive, and financed in a way that is both unfair and endangering the prospects of post-crisis recovery. An alternative plan is proposed.
Expected impacts from the disruption to children’s education as a result of the Covid-19 crisis have been a recurrent theme since the start of lockdown, particularly for children from more disadvantaged backgrounds. Children in Reception and Year 1 are among the first being encouraged to return to school from 1 June. At the same time, early years and childcare settings are also being asked to welcome more children back. This focus on getting the youngest back to educational settings acknowledges the critical importance of learning in the early years for future outcomes.
During this crisis, central government has provided unprecedented levels of financial support for employers, employees and self-employed workers.
The economic downturn in the wake of Covid-19 means forecasters must navigate a totally different economic landscape. But by organising thoughts about possible future scenarios, forecasts can help governments identify policies to bridge from today to a new future
The ONS intends to alter the way it computes the CPIH index in response to the CV19 Lockdown and social distancing (ONS 2020). Partly this has to do with the collection of prices: partly with the calculation itself. Indeed in yesterday’s published minutes of the MPC, the problems of the scope of collection and the availability of certain price series was highlighted.
Massive changes in monetary policy in the United States and the United Kingdom have occurred since the middle of March, when the seriousness of the coronavirus epidemic was becoming apparent. The changes have not been fully explained by either central bank, let alone justified.
The world is undergoing an unprecedented shock as a result of the Covid-19 pandemic and the widespread lockdowns. As major world economies are being put on hold, millions of jobs and incomes are being lost, which has created an imperative for economic policy actions to counteract the falls in demand and increased market uncertainty.
In the wake of Covid-19 related nursery and school closures, the quality of the home learning environment is more important than ever. We know that very young children depend on high quality interaction to support their cognitive, language, social and emotional development and the current crisis only serves to emphasise the need for good quality programmes that support families in providing the best start for their children.
I propose a universal freeze on balance sheets. This would be similar to a debt standstill but here applied to all obligations including rents and pension contributions. For struggling firms, the policy will take the form of temporary cessation of activities that could have legal status and allow them to continue at the end of the period of lockdown.
A big, targeted, immediate, global ﬁscal response is needed to minimize the macroeconomic fallout worldwide.
A cacophony of economists is now calling for “whatever it takes” on the fiscal because, notwithstanding the many steps to be taken on the monetary and financial sides, the core of the macroeconomic policy response to the pandemic has to be fiscal.
But exactly how much, when, how, how long, by whom? are not just “details, dear boy, details”. Absent specifics, such calls are mere grandstanding. It is time to get specific.
Expectations are high for the upcoming Budget to deliver on a number of ambitious promises – from ‘levelling up’ the UK economy to raising long-term growth and improving public services. After more than a decade of dismal pay growth – real-term earnings have only last month returned to levels last reached in 2008 – British workers may wonder whether the Budget will help improve pay.
The votes have been counted and the results are in and we now know that the Conservatives will lead an administration with a mandate strong enough to last for a whole Parliamentary term. The deep question though is whether they can get the economy moving beyond its Brexit impasse and out of the doldrums, in which it has been stuck since the financial crisis. During the campaign we saw the consequences of the Brexit impasse across a raft of policy areas.