ECONOMIC OUTLOOK:

The United Kingdom Economy:

Capital: London

Population: 58 millions

Main Economic Data
Time (t)	Real GDP Growth (GDP) (%)	Unemployment Rate (U) (%)	Inflation Rate (p) (%)
1998	-	-	-
1999	-	-	-
2000	2.9	-	-
2001Q1++	0.6	-	-
2001Q2+	2.3	-	-
2001Q3++	0.5	-	2.3 (Sept)
2001Q4	-	-	2.3 (Oct)
Other Economic Data
Earnings Growth (%)		5.0 (2001Q1); 4.8 (Jun/2001+)
Industrial Production (%)		0.7 (2001Q1); -1.6 (Sept/2001+)
Retail Sales Growth (%)		8.6 (Oct/2001); 8.2 (Nov/2001)

GDP = Y and Y* = 2.5%

U* = 5.7%; Claimant U = 3.2% (Jun/2001)

p = RPIX; p Target = 2.5%

+ Compared with the same month/quarter a year earlier

++ Compared with the previous month/quarter

Interest Rates (i) 2001
Month	Base Rate (%)	DW (%)	P (%)	S (%)
Beginning	6	-	-	-
Aug	5	-	-	-
Sept	4.75	-	-	-
Oct	4.5	-	-	-
Nov	4	-	-	-

DW = Discount Window; P = Prime Lending Rate; S = Savings Rate

l Britain's GDP will grow for the 11th consecutive year. (Dudley Fishburn, The World in 2001)

l No doubt the UK economy has been doing very well in terms of nearly full employment level and on-target inflation rate since the mid-1990s (despite some manufacturing industries have suffered tremendously). Unemployment has been falling almost continuously from a peak of nearly 3 million in 1993, with three small rises soon reversed. The government believes that there are 1 million or so vacancies are now on offer around the country.

l The natural rate of unemployment (U*) in the UK is estimated at 5.7%. And the strong exchange rate has prevented inflation rising even though the unemployment rate has fallen below U*. (Stephen Nickell, May 2001)

l The long-term average growth rate (Y*) of the UK economy is about 2.5%. (HSBC, May 2001)

l The super-sensitive UK housing sector appears unable to sustain base rates at or around 5% without sharp rises in property prices. In many ways, the housing market is to the British consumer what the stock market has traditionally been to the Americans. (Lea Paterson, Jun 2001)

l The adult rate of the national minimum wage is GBP3.70/hour (rising to GBP4.10/hour in October) and the rate for 18-21-year olds is GBP3.20/hour (rising to GBP3.50/hour in October 2001 and GBP3.60/hour in October 2002).

l Some analysts forecast that the UK would be a member of the euro by 2003-05. However, Sir Edward Geroge said that any attempts to force down the pound ahead of euro entry would push inflation higher.

l The UK government claims that 60% of the UK trade is with the Euroland. Roger Bootle said that the true figure, after taking into account trade in services and investment income, was 43%. Kitty Ussher said that the Eurozone accounted for about half of the UK's trade in goods and services.

l Underlying UK inflation remained at a two-year high in June, mainly due to rising food prices.

l The number of people claiming benefit went down by 12,000 in June to 963,700, a jobless rate of 3.2% - the best figures since 1975. In July, claimant unemployment saw its biggest fall in six months, dropping by 13,000. In August, the figure fell by 6,000 to 945,600, which is the lowest figure since October 1975.

l Mortgage costs tumbled to their lowest level in more than 40 years after the Bank of England had cut interest rates to 5% in August. They later cut rates to 4.75% by 0.25% in September, to 4.5% (the lowest level since 1964) by 0.25% on 4 October and to 4% (the lowest level since 1955; Halifax, Britain's largest mortgage lender, cut its key rate to 5%) by 0.5% on 8 November (7 times in total from 6%). The rate is what the bank charges other financial institutions for loans, and is an important tool for stimulating consumer demand and fighting inflation.

l The property market and the high street are the two areas that have escaped unscathed from the economic slow-down so far. The current average house price is at GBP90,361, with the annual rise in house prices still running at 11.9% - the highest level since July 2000. Retail sales volumes rose 6% year-on-year in July, and analysts forecast a further acceleration.

l The manufacturing sector, which accounts for about 20% of the UK economy, is currently in recession.

l The underlying rate of inflation, which excludes mortgage interest payments, was up 0.4% to 2.6% - its highest level since March 1999 as the cost of motoring and seasonal foods increased.

l Nearly 80% of students from middle-class homes go on to higher education. From poor socio-economic backgrounds, it is not yet 20%.

l Public sector pay grew far slower than private sector pay in the 1980s and 1990s, although this trend reversed recently after the Government's generous spending plans. Steve Nickell, a labour market expert appointed to the Monetary Policy Committee (MPC) last year, found evidence of a substantial decline in the quality of male teachers, nurses and other civil servants during the 1980s, and links this to the drop in relative pay levels.

l Manufacturing had suffered its sharpest monthly contraction in September since May 1992, dropping 1.6% in manufacturing output.

l Scotland, London and the North East are among the areas that still have a jobless rate of more than 6.5%, considerably above the level compatible with full employment. The last time the national jobless rate was greater than 6.5% was in 1997, when there were half a million more looking for work than there are today. Recently, many of these high unemployment areas have been moving away, not towards, the national average. The claimant count for the whole economy began to rise last month. But it started to increase in London and Scotland in the summer. Despite upbeat headline figures, there have been regional pockets of high unemployment throughout the 1990s boom, and these areas can only deteriorate as the economy turns down. These regional disparities are not the only sign that all is far from well in the UK labour market. Of concern too is the notable increase in economic inactivity, that is, people who are out of a job, but are no longer seeking work.

l The UK government debt amounts to 30% of GDP.

Sources: Asahi.com; BBC; CNN.com; The Economist; Evening Standard; Forexnews.com; FTMarketWatch; Guardian Unlimited; Insurance News Net UK; Invest Avenue; Irish Times; iWon; Los Angeles Times; Next Magazine; NJ.com (NewsFlash); The New York Times; SiliconValley.com; Star Tribune; The Times; TVB News; The World in 2001; Zawya.com