The global economic slowdown and uncertainty about the euro area outlook, alongside necessary fiscal retrenchment and private-sector deleveraging, are generating strong headwinds for the UK economy. Output has been broadly flat over the past two years and remains more than 3% lower than at its peak in the first quarter of 2008 (, Panel A). Private consumption is being restrained by declining real disposable income, deleveraging, precautionary saving and tight access to credit. Private investment suffers from weak demand for goods and services, high uncertainty and tight financial conditions. Foreign trade was supportive in 2011, as exports benefitted from the depreciation of sterling and exceeded their pre-crisis peak, but growth in net exports turned negative in 2012 as the world economy slumped.