Britain’s curious economic recovery

Simon Nixon reports:

Now the U.K. is providing another mystery. Next week’s GDP data are likely to show that the economy grew 0.8% in the third quarter compared with the previous quarter. Indeed, if recent survey data are to be believed, growth could be heading for 5% year-over-year, according to Rob Wood, chief U.K. economist at Berenberg Bank.

Yet this growth spurt has taken economists almost entirely by surprise. It is hard to identify a single leading forecaster predicting such a strong recovery at the start of the year, or even at the end of the first quarter.

At least two points are worthy of note.  First, the possibility of catch-up growth, at least for countries with reasonably well-functioning labor markets, has in general been under-discussed in the debates on “austerity.”  Second, it still may be the case that a latter British generation may have lower real wages than their immediate forerunners.


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