Is the United Kingdom currently suffering from an aggregate demand problem?

1. CPI annual inflation stands at 2.9% in June.

2. Core inflation stands at 2.3% and has not been below 2% in some time.

3. The producer price index is showing 4.2% inflation (see the first link).

4. Unemployment is falling, and is becoming increasingly a problem of long-term unemployment, which has less to do with aggregate demand.

5. There is now a surge in residential building.

6. Manufacturing PMI just rose to 54.6, a strong performance and one which cannot be attributed to the glitter of the global economy.

The following, however, may still be true claims and indeed likely are true claims:

7. AD problems from the past still have persistent effects in July 2013, including on long-term unemployment.

8. The UK government cut back on some critical investments, and furthermore those cutbacks created enduring sectoral shift problems when it comes to employment.

9. The path of ngdp growth should have been higher in the recent past.

Still, when I look at the UK economy of July 2013, I don’t see an economy wracked with current aggregate demand problems.


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