#economy – Martin Wheatcroft

ICAEW chart of the week: Global GDP

My chart for ICAEW this week looks at the relationship between population and GDP around the world.

A three column chart each adding up to 100% with the central bar showing percentages of the global population, the left-hand bar showing percentages of market GDP. and the right-hand bar showing percentage of power-purchasing-parity (PPP) GDP. The bars are linked with lines to emphasise the relative proportions.

US & Canada: Market GDP 29% - Population 5% - PPP GDP 16%.
Europe: Market GDP 23% - Population 7% - PPP GDP 18%.
China: Market GDP 17% - Population 17% - PPP GDP 20%.
Rest of the world: Market GDP 24% - Population 28% - PPP GDP 30%.
South Asia & China: Market GDP 7% - Population 43% - PPP GDP 16%.

27 Jun 2025. Chart by Martin Wheatcroft. Design by Sunday. Source: IMF, 'World Economic Outlook Database, Apr 2025'.

According to the latest World Economic Outlook Database published by the International Monetary Fund in April 2025, the 387m people that live in the US and Canada, some 5% of the global population of 8.1bn, are together expected to generate about 29% of global economic activity as measured by GDP converted at market exchange rates in 2025.

The US – the largest economy in the world – is expected to generate 27% with 4.3% of the global population, while Canada with 0.5% of the world’s people represents 2% of the global economy.

My chart this week also shows how the US and Canada together constitute 16% of the global economy using GDP converted on a Purchasing-Power-Parity (PPP) basis that adjusts for the relative cost of living between countries. The US is the world’s second largest economy on this basis with 15% of total economic output, while Canada represents 1.3% of the total.

Europe’s 602m people are 7% of the global population (excluding Russia, but including Georgia) and are expected to generate around 23% of global economic output at market exchange rates in 2025 or around 18% on a PPP basis.

This includes the 452m people or 5.6% of the total living in the EU that generate 18% of global output or 14% on a PPP basis, the second largest economy on a market exchange rate basis and the third largest after adjusting for purchasing power. Germany with 1% population generates 4.3% and 3% of market GDP and PPP GDP respectively, followed by France (0.8% generating 2.9% and 2.2%), Italy (0.7% generating 2.2% and 1.8%), Spain (0.6% generating 1.6% and 1.4%), the Netherlands (0.2% generating 1.2% and 0.7%) and Poland (0.5% generating 0.9% and 1%).

Outside the EU, the 70m people in the UK, 0.9% of the world’s total, generate 3.4% of global economic activity on a market exchange rate basis and 2.2% on a purchasing power basis.

China’s 1.4bn people constitute 17% of the world’s population and generate 17% of market GDP, in effect the average level of global economic activity on a per capita basis at current exchange rates. However, on a cost-of-living adjusted basis, they are the world’s biggest economy at 20% of PPP GDP and above average on a per capita basis.

The chart groups the rest of East Asia, South East Asia, Oceania, the Middle East, Russia, Central Asia, Latin America and the Caribbean into a ‘rest of the world’ category with 2.3bn people or 28% of the world’s population. They generate 24% of the global economy on a market exchange rate basis and 30% on a purchasing power basis.

This category includes the 10 ASEAN countries in South East Asia that together make up 8.5% of the world’s population, 3.6% of market GDP and 6.4% of PPP GDP led by Indonesia (3.5%, 1.2% and 1.4%). Others include Japan (1.5% population, 3.6% market GDP and 3.3% PPP GDP), Russia (1.5%, 2.3% and 3.5%), Türkiye (1.3%, 1.1% and 1.8%), Mexico (1.6%, 1.6% and 1.6%), South Korea (0.6%, 1.6% and 1.6%), Australia (0.3%, 1.5% and 1%), Brazil (2.6%, 1.0% and 2.4%), Taiwan POC (0.3%, 1% and 0.8%) and Saudi Arabia (0.4%, 0.8% and 1%).

The final category is South Asia and Africa, which together include many of the poorest countries on Earth, with 43% of the global population but just 7% of the global economy based on market exchange rates and 16% on a cost-of-living adjusted basis.

South Asia’s 2bn people are 24.3% of the world’s population, generating 4.4% of market GDP and 10.3% of PPP GDP. This includes India’s 1.5bn people (17.9% of the global population generating 3.6% and 8.5% respectively), the world’s fifth largest national economy at market exchange rates behind the US, China, Germany and Japan, and the third largest on a PPP basis behind China and the US. It also includes Pakistan (3% of the world’s people generating 0.3% and 0.8% of economic activity) and Bangladesh (2.1% generating 0.4% and 0.9%).

Africa’s 1.5bn people constitute 18.3% of the world’s total, generating just 2.7% of market GDP and only 5.3% of PPP GDP. This includes South Africa (0.8%, 0.4% and 0.5%), Egypt (1.3%, 0.3% and 1.1%), Nigeria (2.9%, 0.2% and 0.8%), Ethiopia (1.4%, 0.1% and 0.2%) and the Democratic Republic of the Congo (1.3%, 0.1% and 0.1%).

The chart illustrates how economic activity, both before and after adjusting for purchasing power, is weighted towards the US and Europe, while South Asia and Africa have a long way to go to become as prosperous.

While this may seem a stiff mountain to climb economically, China’s transformation over the last 30 years provides an example of what is possible, especially as ageing populations in many developed countries reduce their ability to grow as quickly as those countries with much younger demographics such as in South Asia and Africa.

As they say, watch this space.

This chart was originally published by ICAEW.

ICAEW chart of the week: Quarterly GDP over three years

Our chart this week looks at how quarterly GDP has risen from £610.3bn in the first quarter of 2022 to £738.6bn in the first quarter of 2025.

A step chart showing the change in quarterly GDP over the last three years.

Left hand column: Quarterly GDP in 2022 of £610.3bn.

Step 1: Inflation (GDP deflator) +£108.0bn or +17.7%.

Step 4: Economic growth +£20.3bn or +2.8%.

Right hand column: Quarterly GDP in 2025 Q1 of £738.6bn.

Shaded box in the middle of the chart for steps 2 and 3 which are a breakdown of step 4.

Step 2: Population growth +£23.7bn or +3.3bn.

Step 3: Per capita economic growth -£3.4bn or -0.5%.

30 May 2025. Chart by Martin Wheatcroft FCA. Design by Sunday. Source: ONS, 'GDP first quarterly estimate, UK: Jan-Mar 2025'.

According to the Office for National Statistics (ONS), GDP was £738.6bn in the quarter from January to March 2025, £128.3bn or 21.0% higher than the £610.3bn reported for the same quarter three years ago.

Our chart of the week illustrates how quarterly GDP was £108.0bn or +17.7% higher in the first quarter of 2025 compared with the same quarter in 2022 as a result of inflation (using the GDP deflator measure) while economic growth contributed a further £20.3bn or +2.8%.

The chart also breaks down economic growth over the past three years between a contribution from there being more people of £23.7bn or +3.3% and a decline in economic activity per person of £3.4bn or -0.5%.

Not shown on the chart are the changes by year, which comprised annual inflation of +8.2%, +4.1% and +4.5% and annual economic growth of +0.8%, +0.7% and +1.3% in 2022/23, 2023/24 and 2024/25 respectively, with the latter split between annual population growth of +1.2%, +1.1% and +1.0%, and annual per capita economic growth of -0.4%, -0.4% and +0.3%.

Also not shown in the chart is economic growth over the last four quarters, which was +0.5%, +0.0%, +0.1% and +0.7% between the first and second quarters of 2024, the second and third quarters, the third and fourth quarters, and the fourth quarter of 2024 and the first quarter of 2025 respectively. These comprised quarterly population growth of +0.3%, +0.2%, +0.2% and +0.2% and quarterly per capita economic growth of +0.2%, -0.2%, -0.1% and +0.5%.

Lower levels of net inward migration are expected to reduce the rate of population growth over the next three years to closer to 0.5% a year, which means that growing the economy faster than inflation will depend on our ability to improve productivity and hence increase real economic activity per person.

In theory, that should be eminently possible given how per capita economic growth averaged 2.4% per year for the 50 years before the financial crisis. Unfortunately, with per capita growth averaging just 0.6% a year over the past decade, productivity will need to increase significantly if we are to turn the situation around over the coming decade.

The good news is that a 21% increase in GDP means tax receipts should be that much higher. The bad news is that public spending has been going up, too.

This chart was originally published by ICAEW.

ICAEW chart of the week: Economic outlook

My chart for ICAEW this week looks at how the OBR is forecasting growth in economic activity per person of 1.1% a year between 2024 and 2030. While better than the average of 0.3% a year achieved over the past 16 years, it is significantly lower than the 2.3% a year seen in the 50 years before that.

Line chart showing GDP per capita between Q1 2008 and Q1 2030, with the forecast period from Q1 2024 onwards shaded grey.

GDP per capita - blue line falling from 2008 to 2010 then rising unevenly to 2019 falling hugely in 2020 then rising again to just below 2019 in 2021 before falling to 2024 and then a projected rise from 2024 onwards.

Trend lines overlaid as follows:
Q1 1958 to Q1 2008: +2.3% a year (not shown in the chart).
Q1 2008 to Q1 2024: +0,3% a year (purple).
Q1 2009 to Q3 2019: +1.3% a year (yellow).
Q1 2024 to Q1 2030: +1.1% a year (dotted black line).

My chart of the week is on the economic projections calculated by the Office for Budget Responsibility (OBR) in its October 2024 economic and fiscal outlook that accompanied the Autumn Budget 2024.

This assumption is a key driver for the OBR’s fiscal projections for tax receipts between now and March 2030, and hence how much the government will need to borrow to finance the current deficit and its investment plans.

The chart starts in March 2008 at the height of the financial crisis, illustrating how economic activity per person after adjusting for inflation fell significantly until September 2009. Real GDP per capita then grew at an average rate of 1.3% a year until September 2019, before the rollercoaster ride that saw the economy collapse during the pandemic, recover and then slide back during the energy crisis. A small uptick in the first quarter of 2024 is hardly noticeable.

The result was that real GDP per capita was only 4.4% higher in March 2024 than it was in March 2008, the equivalent of 0.3% a year on average over 16 years.

The OBR has been more optimistic for the current financial year up until March 2030, predicting per capita economic growth of 1.1% a year on average between the first quarter of 2024 and the first quarter of 2030.

This is of course much better than the 0.3% average increase over the past 16 years, but it is below the 1.3% growth in real GDP per capita during the ‘austerity years’ following the financial crisis and is substantially below the 2.3% average increase over the 50 years prior to the financial crisis.

From a ‘glass half empty’ perspective, this emphasises just how poorly the UK economy has performed since the financial crisis and the challenges the incoming government has in trying to improve productivity and economic output, even without the risk of an economic shock, events that appear to occur every decade or so.

However, those with a ‘glass half full’ temperament will be more cheerful. After all, there does appear to be substantial space for economic growth to improve from the OBR’s less-than-sparkling predictions, even without returning to the heady days of the pre-financial crisis long-term trend.

This chart was originally published by ICAEW.

ICAEW chart of the week: IMF World Economic Outlook Update

My chart for ICAEW this week illustrates how countries rank in the IMF’s latest forecasts for economic growth over 2024 and 2025.

IMF World Economic Outlook Update
ICAEW chart of the week

(Horizontal bar chart)

Legend:

Emerging markets and developing economies (green)
World (purple)
Advanced economies (blue)
UK (red)

Projected annualised real GDP growth 2024 and 2025

Bars in green except where noted.

India: +6.5%
Philippines: +6.0%
Indonesia: +5.0%
Kazakhstan: +4.4%
China: +4.3%
Malaysia: +4.3%
Saudi Arabia: +4.3%
Egypt: +3.8%
Iran: +3.4%
Thailand: +3.2%
Türkiye: +3.1%
World Output: +3.1% (purple)
Nigeria: +3.0%
Poland: +3.0%
Pakistan: +2.7%
World Growth: +2.6% (purple)
South Korea: +2.3% (blue)
Mexico: +2.1%
United States: +1.9% (blue)
Canada: +1.8% (blue)
Russia: +1.8%
Brazil: +1.8%
Spain: +1.8% (blue)
Australia: +1.7% (blue)
France: +1.3% (blue)
South Africa: +1.1%
United Kingdom: +1.1% (red)
Germany: +1.0% (blue)
Argentina: +1.0%
Netherlands: +1.0% (blue)
Italy: +0.9% (blue)
Japan: +0.8% (blue)

8 Feb 2024.
Chart by Martin Wheatcroft FCA. Design by Sunday.
Source: IMF World Economic Outlook Update, 30 Jan 2024.

(c) ICAEW 2024

Each January, the International Money Fund (IMF) traditionally releases an update to its World Economic Outlook forecasts for the global economy. This year it says that it expects the global economy to grow by an average of 2.6% over the course of 2024 and 2025 at market exchange rates, or by 3.1% when using the economists-preferred method of converting currencies at purchasing power parity (PPP).

The chart shows how the 30 countries tracked by the IMF fit between emerging market and developing economies, most of which are growing faster than the global averages, and advanced economies, which tend to grow less quickly.

The biggest drivers of the global forecast are the US, China and the EU, with both the US and China expected by the IMF to grow less strongly on average over the next two years than in 2023. This contrasts with an improvement over 2023 (which involved a shrinking economy in Germany) by the advanced national economies in the EU over the next two years – apart from Spain, which is expected to fall back from a strong recovery in 2023.

Growth in emerging and developing countries is expected to average 4.1% over the two years, led by India (now the world’s fifth largest national economy after the US, China, Germany and Japan), followed by the Philippines, Indonesia, Kazakhstan growing faster than China, followed by Malaysia, Saudi Arabia, Egypt, Iran, Thailand and Türkiye.

Nigeria, Poland and Pakistan are expected to grow slightly less than world economic output, followed by Mexico.

Russia, Brazil and South Africa are expected to grow less strongly, while Argentina is expected to grow the least, with a forecast contraction in 2024 expected to be followed by a strong recovery in 2025.

The strongest-growing of the advanced economies in the IMF analysis continues to be South Korea, followed by the US, Canada, Spain, Australia, France, the UK, Germany, the Netherlands and Italy, with Japan expected to have the lowest average growth. Overall, the advanced economies are expected to grow by an average of 1.6% over the next two years.

For the UK, forecast average growth of 1.0% over the next two years is expected to be faster than the 0.5% estimated for 2023, but at 0.6% in 2024 and 1.6% in 2025 we may not feel that much better off in the current year.

Of course, forecasts are forecasts, which means they are almost certainly wrong. However, they do provide some insight into the state of the world economy and how it appears to be recovering the pandemic.

For further information, read the IMF World Economic Outlook Update.

More data

Not shown in the chart are the estimate for 2023 and the breakdown in 2024 and 2025, so for those who are interested, the forecast percentage growth numbers are as follows:

Emerging market and developing countries:

Country	Average over 2024 and 2025	2023 Estimate	2024 Forecast	2025 Forecast
India	6.5%	6.7%	6.5%	6.5%
Philippines	6.0%	5.3%	6.0%	6.1%
Indonesia	5.0%	5.0%	5.0%	5.0%
Kazakhstan	4.4%	4.8%	3.1%	5.7%
China	4.3%	5.2%	4.6%	4.1%
Malaysia	4.3%	4.0%	4.3%	4.4%
Saudi Arabia	4.1%	-1.1%	2.7%	5.5%
Egypt	3.8%	3.8%	3.0%	4.7%
Iran	3.4%	5.4%	3.7%	3.2%
Thailand	3.2%	2.5%	4.4%	2.0%
Türkiye	3.1%	4.0%	3.1%	3.2%
Nigeria	3.0%	2.8%	3.0%	3.1%
Poland	3.0%	0.6%	2.8%	3.2%
Pakistan	2.7%	-0.2%	2.0%	3.5%
Mexico	2.1%	3.4%	2.7%	1.5%
Russia	1.8%	3.0%	2.6%	1.1%
Brazil	1.8%	3.0%	2.6%	1.1%
South Africa	1.1%	0.6%	1.0%	1.3%
Argentina	1.0%	-1.1%	-2.8%	5.0%

Advanced economies (including the UK):

Country	Average over 2024 and 2025	2023 Estimate	2024 Forecast	2025 Forecast
South Korea	2.3%	1.4%	2.3%	2.3%
USA	1.9%	2.5%	2.1%	1.7%
Canada	1.8%	1.1%	1.4%	2.3%
Spain	1.8%	1.1%	1.4%	2.3%
Australia	1.7%	1.8%	1.4%	2.1%
France	1.3%	0.8%	1.0%	1.7%
UK	1.1%	0.5%	0.6%	1.6%
Germany	1.0%	-0.3%	0.5%	1.6%
Netherlands	1.0%	0.2%	0.7%	1.3%
Italy	0.9%	0.7%	0.7%	1.1%
Japan	0.8%	1.9%	0.9%	0.8%

This chart was originally published by ICAEW.

ICAEW chart of the week: South Korea

My chart this week looks at the economic success story of South Korea over the last 30 years or so, using Japan as a comparator.

Line chart showing GDP per capita in current US$ between 1990 and 2023.

Japan $2,158 in 1990, steady up to 1995 then zigzags ups and down and up and down and up to a peak in 2012 before falling to 2015 then up then flattish then down and then up to $2,949 in 2023.

South Korea $551 in 1990, steady up to 1996, then down to 1998 then up then down then steady up to 2007, then down to 2009, then zig zag up to 2021, then down, then up to $2,783 in 2023.

The news that South Korea, to align with most of the rest of the world, is cutting the age of its citizens by a year or two – it used to deem a baby one year old at birth, and add a year on 1 January – prompted us to take a look at this peninsula nation and its amazing economic success story.

As my chart this week illustrates, GDP per capita in 1990 in South Korea was $551 per month in then current US$, approximately one quarter of its neighbour Japan’s GDP per capita per month at that time of $2,158

South Korea has seen its economy grow pretty strongly over the last three decades to reach a forecast GDP of $2,783 per person per month for the current year according to the International Monetary Fund (IMF). This is only a little below the economic activity of $2,949 per person per month anticipated to be generated by Japan in 2023.

South Korea has made steady economic progress since 1990. Outside of recessions and pandemics there have been continual improvements in economic activity and in living standards, resulting in the country moving from the developing nation category to an advanced economy.

This compares with the economic performance of neighbouring Japan, which has been on an economic rollercoaster since the end of the economic boom in the mid-1990s. While a strong currency in the run-up to the global financial crisis boosted the size of its economy in US dollar terms, Japan has subsequently underperformed as its ageing population and lack of immigration has caused its economy to slow and the Yen to fall.

Not shown in the chart is the progress made in purchasing power parity (PPP) international dollars, the measure that economists prefer to use when comparing economic performance between countries as it takes account of differences in living costs. This would show a narrower difference in 1990, when South Korean and Japanese GDP per capita per month were 629 and 1,692 international dollars respectively, and would also show South Korea outgrowing Japan with GDP per capita per month in 2023 of 4,725 international dollars, compared with 4,317 international dollars for Japan.

Many South Koreans waking up on Wednesday 28 June 2023 will have been pretty happy to discover they are now a year or two younger than they were the day before. They may be less likely to reflect on the economic miracle that has taken their country from the depths of extreme poverty in the early 1950s, following the Korean War, to becoming the prosperous nation that South Korea is today.

This chart was originally published by ICAEW.

ICAEW chart of the week: Fuel prices

Our chart this week gives a breakdown of what makes up the cost of petrol and diesel, which continue to soar in price despite the temporary cut in fuel duty.

Column chart showing wholesale costs for 50 litres, distribution and retail costs, taxes and the fuel duty saving.

Petrol: £36.75, £4.30 and £40.40 = £81.45 (162.9p/litre x 50) after a fuel duty saving of £3.00.

Diesel: £44.20, £2.90 and £41.60 = £88.70 (177.4p/litre x 50) after a fuel duty saving of £3.00.

Source: RAC Foundation, 'Daily Fuel Prices 2022-05-03' x 50 litres.

A key component of the cost-of-living crisis is the expense incurred filling up our cars, which has risen by over 50% in two years from approximately 107p a litre for petrol and 112p a litre for diesel back in May 2020 to average prices of 162.9p and 177.4p per litre respectively on 3 May 2022.

Our chart illustrates how much this means in terms of a 50-litre fuel purchase. For petrol, this would have cost an average of £81.45 according to numbers supplied by the RAC Foundation, comprising £36.75 in wholesale costs, £4.30 in distribution and retail costs, and £40.40 in taxes. For diesel, the cost of buying 50 litres would have been £88.70, comprising £44.20 in wholesale fuel costs, £2.90 for distribution and the retailer, and £41.60 in taxes.

In each case, the Chancellor’s temporary 5p cut in fuel duty saves 6p per litre once VAT is taken into account, or £3.00 on a 50-litre purchase.

The wholesale costs of £36.75 and £44.20 (73.5p and 88.4p per litre) for petrol and diesel respectively are made up of £31.30 and £35.55 (62.6p and 71.1p per litre) for refined petrol and diesel and £5.45 and £8.65 (10.9p and 17.3p per litre) for bio content (principally ethanol) included in what you buy at the pump. Distribution and retail costs of £4.30 and £2.90 (8.7p and 5.8p per litre) for petrol and diesel respectively comprise delivery and distribution costs of £0.85 and £1.05 (1.7p and 2.1p per litre) and retailer margin of £3.45 and £1.85 (6.9p and 3.7p per litre).

Taxes of £40.40 and £41.60 (80.7p and 83.2p per litre) comprise fuel duty of £26.45 (52.9p per litre) and £0.35 (0.7p per litre) in greenhouse gas and development fuel obligations for both petrol and diesel, and £13.60 for petrol and £14.80 for diesel (27.1p and 29.6p respectively) in VAT at 20%.

Most of the fuel duty cut has been absorbed by higher wholesale costs, meaning that prices at the pump are only just below their peak immediately prior to the Spring Statement on 23 March. However, retail fuel prices could well go up further in the coming weeks as higher crude oil prices flow through into the cost of refined petrol and diesel in response to EU sanctions against Russian oil.

Taxes on petrol and diesel remain a significant contributor to the public purse, with £26bn expected to be generated in fuel duty in the current fiscal year, despite a decade or so of freezing the rate and the recent temporary cut until March next year. The plan to phase out petrol and diesel vehicles poses a big dilemma for HM Treasury, which will need to make up for lost tax revenues once there is no hydrocarbon fuel to levy duties on.

The current favourite option to fill the gap is road pricing, but the government has yet to formally announce a decision, something that will become more pressing as more and more drivers switch to electric cars.

This chart was originally published by ICAEW.

ICAEW chart of the week: G7 economic growth

The latest IMF economic forecasts put the UK at the bottom of the pile in 2023, but our chart this week elevates the UK to fifth place out of seven by looking at average growth for the four years from 2020 to 2023.

Chart presenting economic growth for the G7 in 2020, 2021, 2022, 2023 and the average over four years.

USA: -3.4%, +5.7%, +3.7%, +2.3%, average +2.0%
Canada: -5.2%, +4.6%, +3.9%, +2.8%, average +1.4%
Germany: -4.6%, +2.8%, +2.1%, +2.7%, average +0.7%
France: -8.0%, +7.0%, +2.9%, +1.4%, average +0.7%
UK: -9.3%, +7.4%, +3.7%, +1.2%, average +0.6%
Japan: -4.5%, +1.6%, +2.4%, +2.3%, average +0.4%
Italy: -9.0%, +6.6%, +2.3%, +1.7%, average +0.2%

Recent media reports have contrasted the government’s boast of being the best performing economy in the G7 in 2021 with the latest forecasts from International Monetary Fund (IMF) that suggest the UK economy will be bottom of the same league in 2023. Our chart this week attempts to take a step back and look at the overall picture by illustrative average economic growth by the G7 nations over the four years between 2020 and 2023.

These numbers are based on the IMF’s World Economic Outlook and the accompanying World Economic Outlook Database that were published on 19 April, setting out economic forecasts for the world economy over the next few years.

According to the IMF, the USA is the best performing economy in the G7, with average annual economic growth of +2.0% over the period from 2020 to 2023. An economic contraction of 3.4% in 2020 was more than offset by a rebound of 5.7% in 2021, followed by forecast growth of 3.7% in 2022 and 2.3% in 2023. Canada is not far behind, with an average growth of 1.4% over the four years, comprising respectively -5.2%, +4.6%, +3.9% and +2.8% in 2020, 2021, 2022 and 2023.

Germany and France fare pretty similarly to each other, with Germany projected to experience marginally above 0.7% average growth and France marginally below. The patterns are different, however, with Germany having suffered a less severe economic hit during 2020 followed by moderate growth (-4.6%, +2.8%, +2.1%, 2.7%), while France was hit much harder by the pandemic followed by a much stronger rebound before a return to lower growth in 2023 (-8.0%, +7.0%, +2.9%, +1.4%).

The UK is in fifth place in this league table, but at 0.6% average economic growth over the four years selected this is only slightly less than Germany and France. With an economic contraction in 2020 of 9.3%, the UK suffered more severely from the pandemic than the other members in the G7 (although this is partly because of differences in statistical methodologies) but then saw the biggest rebound in 2021 with growth of 7.4%. Growth this year is forecast by the IMF to be 3.7% before falling to an (unfortunately) more typical level of 1.2% in 2023.

Vying for the wooden spoon are Japan and Italy, with Japan continuing a long period of low growth and a slower recovery from the pandemic than the others to average 0.4% a year (-4.5%, +1.6%, +2.4%, +2.3%). Italy secured the bottom position by virtue of being hit hardest by the pandemic and having less of a rebound than others (-9.0%, +6.6%, +2.3%, +1.7%), a net average growth rate of 0.2% over the four-year period.

For those that follow this particular league table, there is a hope that slightly stronger growth than the IMF has forecast could move the UK up one or two places above France and/or Germany. However, the bigger concern for most of us is about the downside risks to the global and UK economies from the war in Ukraine, rampant inflation, and a global cost of living crisis. These may put back even further any hope of returning the UK and other developed economies to a pre-financial crisis path of moderate economic growth.

This chart was originally published by ICAEW.

ICAEW chart of the week: Consumer Prices Index

My chart this week looks at how price rises have accelerated over the last few months, with consumer price inflation reaching 4.2% in October, the highest it has been for a decade.

Line chart showing how the Consumer Prices Index has increased from 106.7 in Oct 2018 to 107/6 in Apr 2019 to 108.3 in Oct 2019 (a +1.5% increase over a year earlier) to 108.5 in Apr 2020 to 109.1 in Oct 2020 (up 0.7% over the year) to 110.1 in Apr 2021 to 113.6 in Oct 2021 (a 4.2% annual increase).

The Office for National Statistics published its latest estimates for inflation on Wednesday 17 November, reporting a 12-month increase in the Consumer Prices Index (CPI) of 4.2% and a 12-month increase in the Consumer Prices Index including owner occupiers’ house costs (CPIH) of 3.8%, both of which are the highest they have been since November 2011 when CPI was 4.8% and CPIH was 4.1%.

CPI and CPIH are calculated using a basket of goods and services to assess the level of inflation experienced by consumers, with the current index set to 100 in July 2015.

The ICAEW chart of the week shows how CPI fell before increasing from 106.7 in October 2018 to 107.6 in April 2019 and 108.3 in October 2019, an annual increase of 1.5% that was within the 1% to 3% Bank of England target range. This was followed by smaller increases to 108.3 in April 2020 and 109.1 in October 2020, a 0.7% annual increase in CPI driven in part by the pandemic. The index hovered around that level for several months until starting to increase more rapidly from March onwards as the economy started to re-open, reaching 110.1 in April 2021 and continuing to increase sharply to 113.6 in October 2021, an annual increase of 4.2%.

The Governor of the Bank of England is required to write to the Chancellor of the Bank of England whenever inflation is more than 1% above or below the 2% target and he did so on 23 September when inflation reached 3.2% and he will again now that it has reached 4.2%. Part of the explanation he has given and will give are ‘base effects’, where price discounting during 2020 at the height of the first and second waves of the pandemic suppressed some of the inflation that is being experienced now.

Further letters are likely over the next few months as even if prices don’t rise any further, given how the index bounced around the 109 level between September and March 2021. This means inflation should continue to stay substantially above 3% for the next four months or so unless prices were to fall again, which is unlikely given how global commodities and supply constraints continue to feed into rising domestic prices. A 12-month CPI-inflation rate of 5% appears more than likely at some point in the next few months.

The Bank of England’s Monetary Policy Committee (MPC) isn’t panicking at this stage given that the annualised rate of inflation over the last three years (comparing October 2021 with October 2018) is an almost on-target 2.1% and their expectation that inflation rate will come down once the flat inflationary period of a year ago starts to drop out of the comparison. However, they are sufficiently concerned about the steep slope in the CPI in the last few months to signal that interest rates may need to rise if prices continue to increase at the pace seen in recent months.

The MPC’s original plan was to hang tight through what they hoped would be a short inflationary spurt as the economy emerges from the pandemic. In the event it looks like they won’t be able to hold that line, with higher interest rates a distinct possibility in the coming months.

This chart was originally published by ICAEW.

ICAEW chart of the week: Household savings

Will there be a rush to spend the £7,000 in household net cash savings built up over the course of the pandemic?

Bar chart showing per household net cash savings by month. Apr 2019: -£25, £45, £0; Jul 2019: -£25, £105, £100; Oct 2019: £5, £55, -£65; Jan 2020: -£55, £35, £555; Apr 2020: £1,020, £1,235, £640; Jul 2020: £455, £465, £295; Oct 2020: £315, £275, £475; Jan 2021: £460, £370, £165; Apr 2021: £280.

The #icaewchartoftheweek is on household savings built up over the course of the pandemic, illustrating how households have saved an average of £7,000 over the last fourteen months. A big question for the economic recovery is whether households will splash the cash once restrictions are lifted, providing a consumer-led boost to the economic recovery?

According to Bank of England statistics released on 2 June 2021, since the start of the pandemic in March 2020 up to April 2021 households have saved or repaid debts in the order of £195bn or an average of £14bn a month. This compares with £4.8bn or £0.4bn a month in the 11 months to February 2020, when cash savings were mostly offset by borrowing on consumer credit or mortgages.

With approximately 27.8m households in the UK according to the Office for National Statistics, this means that families have saved an average of just over £7,000 or £500 per month since the first lockdown in March 2020, compared with approximately £175 or £15 a month in the eleven months prior to the pandemic.

This reflects many lost opportunities for spending, with fewer holidays and nights out possible because of lockdown restrictions. Uncertainty about future economic prospects is likely to have also played a part, with many individuals cutting back on discretionary spending ‘just in case’.

Of course, there is no such thing as an average household. More prosperous families will have saved up a lot more than the £7,000 average and so are likely to have the capacity to spend a lot more if they want to, while many individuals will have run down savings or borrowed to survive through a difficult period.

For those fortunate families who are in a better financial situation, the big economic question is whether they will take the money they have saved from not going on holiday or going out over the course of the last year and put it into their pensions or other forms of investment – or will they choose to splurge on enjoying themselves once restrictions are fully lifted?

The (almost) £200bn question.

This chart was originally published by ICAEW.

Source detail

Source data from Bank of England, Money and Credit – April 2021 (published 2 June 2021) divided by an estimated 27.8m households in the UK per the Office for National Statistics.

Household net cash savings = Seasonally adjusted changes in household M4 bank and building deposits plus changes in National Savings & Investments holdings (together ‘cash savings’), less seasonally adjusted changes in consumer credit and less seasonally adjusted changes in mortgage debt.

Total for 11 months to Feb 2020: cash savings £62.6bn less increases in consumer credit £11.5bn less increase in mortgage debt £46.3bn = £4.8bn or £175 per household.

Total for 14 months to April 2021: cash savings £235.2bn plus net repayments of consumer credit £23.1bn less increase in mortgage debt £63.5bn = £194.8bn or £7,005 per household.

ICAEW chart of the week: UK monthly GDP

This week’s chart takes a look at the rebound in UK gross domestic product in March 2021, despite the country remaining in lockdown.

Chart showing GDP between Mar 2019 and April 2021: from approximately £195bn a month for the first year, before dipping to just over £145bn in April 2020 and then recovering to around £185bn, then falling to just under £180bn and return to almost £185bn in April 2021 with a monthly increase of +2.1%.

UK GDP jumped 2.1% in March 2021 according to the Office for National Statistics. A positive sign but, as our chart of the week illustrates, there is still a long way to go to get back to pre-pandemic levels of economic activity.

The #icaewchartoftheweek is on the economy this week, taking a look at how the latest economic statistics from the Office for National Statistics indicate a rebound in GDP in March 2021 even as the country remained in lockdown. This is a positive sign as the UK starts to emerge from the pandemic and people start to return to ‘normality’, albeit a new normal that is likely to be different to what came before.

However, the chart also makes clear how far the UK still has to go to return to pre-pandemic levels of economic activity, with the anticipated square-root shaped recovery stopped in its tracks in the last quarter of 2020 as COVID-19 resurged and restrictions on daily life were reimposed. The 2.1% real-terms growth in GDP in March follows a pattern of ups and downs in recent months with a fall of 2.2% in November, an increase of 1.0% in December, a fall of 2.5% in January, and an increase of 0.7% in February.

With the progress made in combating the virus over the last few months enabling lockdown restrictions to be progressively lifted across the UK, the hope is that March will be the second month on a more sustainable upward curve.

This chart was originally published by ICAEW.