The forecasters were clear when John Healey became chancellor in July: Britain’s resilience to the war in the Middle East would not last.
asserted
resilience → become → East
The global economic headwinds were too strong, inflation was beginning to rise and growth would slow to a trickle.
asserted
growth → begin → trickle
Four months into the job, the economy is continuing to defy expectations after growing by 0.7% in the third quarter – the fastest expansion in two and a half years – leaving the UK as the second-fastest growing G7 economy this year.
On his first day in Downing Street the memo from the Treasury showed the most optimistic City analyst expected 0.3% growth.
asserted
analyst → continue → growth
Most had pencilled in a figure close to zero.
asserted
Most → pencil → zero
Some were warning that the UK could edge towards a recession.
uncertain
UK → warn → recession
Despite the gloomy outlook households have continued to spend and business investment has powered ahead, fuelled by the rollout of AI.
asserted
investment → continue → AI
Underneath the bonnet, growth is being driven by IT and professional services – together contributing about half of the rise in activity.
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growth → drive → activity
As the central sectors in the AI boom, that is hardly surprising – with analysts at ING suggesting the strength in IT was “very clearly a datacentre story” thanks to the UK’s status as a leading destination in Europe for investment.
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strength → suggest → investment
Overall, Deutsche Bank estimates that AI-related spending has added about 0.3%-0.4% to GDP growth this year.
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spending → estimate → growth
It is clear to see why Healey is keen to build on the groundwork laid by his predecessor, Rachel Reeves, to harness AI amid government efforts to court global business investment.
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Healey → see → investment
Meanwhile, household consumption is up by 1.6% so far this year – helped by spending over the warm summer months even as consumers faced a living standards squeeze because the Iran war fuelled a surge in petrol and diesel prices.
asserted
war → help → prices
However, the fear is that the UK’s initial resilience to the global economic storm emanating from the Middle East will soon fizzle out.
asserted
resilience → emanate → East
Both of Britain’s recent growth engines face a tougher period ahead.
asserted
Both → face → period
Financial markets have been rocked in recent weeks amid fears that a bubble in AI stocks could be about to burst.
uncertain
bubble → rock → stocks
A slowdown in technology investment could hit the UK.
uncertain
slowdown → hit → UK
Still, the hope is that swelling demand for AI will not evaporate overnight.
asserted
demand → swell → AI
For households, however, a tough winter lies ahead.
asserted
winter → lie → households
Energy bills are poised to increase by about a quarter in January, with the average annual household gas and electricity bill poised to climb to more than £2,000.
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bill → poise → 2,000
Analysts say it is hard to see how consumer spending would not come under greater pressure in the new year.
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spending → say → year
In the latest data there were some early warning signs: retail sales and consumer discretionary spending fell in September.
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sales → be → September
Real wage growth is cooling and the headline inflation rate is on track to reach a fresh peak of close to 5% next year.
asserted
rate → cool → %
With growth proving resilient, the Bank of England will feel emboldened to raise interest rates to combat imported inflation.
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Bank → prove → inflation
City investors expect at least two more quarter-point increases to 4.5% before the end of next year.
asserted
investors → expect → year
That will hit the brakes on the economy and add to the cost of living squeeze.
asserted
That → hit → squeeze
At last month’s budget Healey struck a defiant tone by arguing that the UK could continue to defy forecasters expectations.
uncertain
UK → strike → expectations
That task, however, is becoming increasingly tough.
asserted
task → become → ?
The Aporia
