OECD Economic Outlook, Volume 2005 Issue 1
Presents OECD's assessment of the economic outlook to the end of 2006 for the OECD area and China, Brazil, and the Russian Federation. It finds that Japan and the US have rebounded but that Europe is lacking in sustained momentum, and it carefully examines why. This issue of the OECD Economic Outlook also includes several medium-term scenarios projecting to 2010. The special chapter covers measuring and assessing underlying inflation.
United Kingdom
Despite a marked slowdown in household spending due to the cooling housing market, output
growth has remained close to trend rates since mid-2004 and into the first quarter of 2005.
Nevertheless, inflationary pressures are emerging, suggesting that the economy is operating close
to, or slightly above, capacity. Going forward, growth is likely to moderate further as export
demand from Europe weakens in the near term and as the saving ratio continues to rise.
Despite the recent pick-up in inflation, weakening growth prospects suggest that monetary tightening will not be required to maintain inflation close to the target. The government deficit was 3% of GDP in the fiscal year ending in the first quarter of 2005 but, in the absence of a spontaneous rise in taxes, a slowdown in spending will be required to achieve a further decisive reduction.
Despite the recent pick-up in inflation, weakening growth prospects suggest that monetary tightening will not be required to maintain inflation close to the target. The government deficit was 3% of GDP in the fiscal year ending in the first quarter of 2005 but, in the absence of a spontaneous rise in taxes, a slowdown in spending will be required to achieve a further decisive reduction.
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