The UK economy continues to recover with a growth rate of 0.6%, while research data reveals the potential economic impact of Amendment 2 in Kentucky. Plus, the struggling eurozone industry faces contraction, raising concerns about economic growth prospects.
Sources:
https://www.theguardian.com/business/article/2024/aug/15/uk-economy-continues-recovery-from-recession-with-gdp-growth-of-06
https://www.wkyt.com/2024/08/14/research-data-shows-potential-economic-impact-amendment-2/
https://www.bloomberg.com/news/articles/2024-08-15/uk-economy-maintains-solid-recovery-in-fillip-for-keir-starmer
https://think.ing.com/snaps/eurozone-industry-continues-to-struggle/
Outline:
(00:00:00) Introduction
(00:00:41) UK economy continues recovery from recession with GDP growth of 0.6%
(00:03:27) Research data shows potential economic impact of Amendment 2
(00:05:37) Eurozone industry continues to struggle
Simply Economics
UK Economy Shows Solid Recovery, Amendment 2’s Economic Impact Revealed
The UK economy continues to recover with a growth rate of 0.6%, while research data reveals the potential economic impact of Amendment 2 in Kentucky. Plus, the struggling eurozone industry faces contraction, raising concerns about economic growth prospects.Sources:https://www.theguardian.com/business/article/2024/aug/15/uk-economy-continues-recovery-from-recession-with-gdp-growth-of-06https://www.wkyt.com/2024/08/14/research-data-shows-potential-economic-impact-amendment-2/https://www.bloomberg.com/news/articles/2024-08-15/uk-economy-maintains-solid-recovery-in-fillip-for-keir-starmerhttps://think.ing.com/snaps/eurozone-industry-continues-to-struggle/Outline:(00:00:00) Introduction(00:00:41) UK economy continues recovery from recession with GDP growth of 0.6%(00:03:27) Research data shows potential economic impact of Amendment 2(00:05:37) Eurozone industry continues to struggle
- Duration:
- 8m
- Broadcast on:
- 15 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Thursday, August 15th. On today's show, the UK economy continues its recovery from recession with a GDP growth of 0.6% and research data reveals the potential economic impact of Amendment 2. Plus, the UK economy maintains a solid recovery with services aiding growth. Let's coverage in more, up next. I'm David and you're listening to Simply Economics. Britain's economy has extended its recovery from last year's recession, recording growth of 0.6% in the second quarter. The Office for National Statistics reports that GDP continued to expand following 0.7% growth in the first three months of the year. This exceeded economists' forecasts of 0.6% growth. For more on this, we turn to our economics correspondent, Bella. What drove this economic growth in the second quarter? The service sector was the main engine powering the economy from April to June. Within services, scientific research and development, IT, transport, legal services, architecture and engineering all performed well. This offset weakness in consumer-facing services, manufacturing and construction. Retail sales were dampened by the cost of living crisis and poor weather keeping shoppers at home. How does this growth compare to what was expected for the UK economy this year? Is the recovery on solid footing? The UK has exceeded many forecasters' predictions so far in 2023. However, this comes after a disappointing decade of sluggish growth. High living costs, rising interest rates and weak productivity gains are still headwinds that could limit the economy's momentum going forward. Business surveys from the CBI suggest underlying activity remains fairly subdued, even if firms are cautiously optimistic the recovery will continue. The new labor government has made boosting economic growth its top priority. How are they planning to achieve that and what challenges do they face? Chancellor Rachel Reeves has acknowledged the scale of the economic challenges, citing over a decade of low growth and a 22-billion-pound budget deficit inherited from the previous government. Labor argues that stronger growth is key to raising living standards and tax revenues to fund public services. However, tough decisions will be needed to fix the economic foundations. The government is betting that short-term pain will lead to long-term gains in making every part of the country more prosperous. Despite the positive headline growth figure, the monthly data for June showed the economy stagnating. Is there a risk the recovery loses steam? June's flat performance does raise some concerns that the quarterly growth may be overstating the economy's underlying strength. Much will depend on whether the service sector can continue to drive expansion and if consumer spending holds up, especially with interest rates at a 15-year high. But after last year's recession, policymakers will likely welcome any signs of growth. Even if the road to a sustained recovery remains bumpy, with plenty of potential potholes ahead. Thanks for that analysis and putting the latest figures into context for us, Bella. Shifting our focus to Kentucky, a new report from the Kentucky Center for Economic Development is shedding light on the potential economic impact of Amendment 2, which would give the state legislature broad authority to subsidize private schools. The amendment is on the ballot this November. For more, we turn to our correspondent at the state capitol. What did this economic analysis find? The report looked at data from other states that have implemented private school voucher programs to get a sense of what could happen in Kentucky if Amendment 2 passes. It found that these programs are pulling money away from public schools in those states. Public education makes up about 44% of Kentucky's general fund budget, so diverting resources to private schools could have a big impact, especially on poorer rural districts that rely heavily on state funding. How are private schools currently distributed across Kentucky? Would all areas of the state be equally impacted? The research shows that most private schools in Kentucky are concentrated in wealthier areas like Kenton, Jefferson and Fayette counties. In fact, about 63% of counties in the state don't have a single private school, so rural districts with less property wealth to generate local taxes would likely feel the biggest pinch if state funding is redirected to subsidize private school tuition. The report also looked at some data on private school enrollment in Kentucky. What did it find there? Last year, there were about 58,000 students enrolled in private schools in Kentucky, with another 40,000 being homeschooled. The analysis cites data from other states, showing that often when voucher programs are implemented, private schools will increase tuition accordingly. On average, about 70% of families that benefit from vouchers are already sending their kids to private schools or planning to. So it doesn't necessarily make private education more accessible. Thank you to our correspondent at the Capitol for that update on the Kentucky Amendment 2 story and the recent Economic Impact Report aiming to inform voters' decisions this fall. Shifting our focus now to the Eurozone, the industrial sector there continues to struggle with a 0.1% month-on-month decline in June extending a long trend of contraction. Despite hopes for a turnaround, there is little evidence that this will happen anytime soon. For more on what this means for the Eurozone economy, we turn to our correspondent. So what's behind this ongoing weakness in the industrial sector? The decline in June, while small, continues a contraction that began way back in September 2022. Most of the latest dip was due to volatile data out of Ireland, but the overall picture for Eurozone industry remains quite bleak. Universities indicate that incoming orders weakened further at the start of the third quarter, pointing to ongoing contraction in production. At the same time, inventories remain elevated, leaving little scope for an imminent recovery in industrial output. And it sounds like manufacturers are facing some challenging cost pressures as well, even as demand stays soft. Exactly. Weak demand is being met by rising costs, such as higher energy prices and transport costs resulting from conflicts in the Middle East. Unlike in 2021 and 2022, when demand was stronger, manufacturers are having a much harder time passing these increased costs through to consumers. This is putting significant pressure on margins, a theme that's likely to persist for manufacturers in the second half of the year. So with industry struggling, it seems the Eurozone economy is increasingly dependent on the service sector to drive growth. How is that shaping expectations? Second quarter GDP growth was confirmed at 0.3% this morning, but the upside looks limited in the short run and is very reliant on service sector performance. However, recent data has cast some doubt on the strength of the service sector. As a result, expectations for Eurozone economic growth over the remainder of the year have weakened. Thanks for the update on the continued struggles for the Eurozone industrial sector and the shaky outlook for growth. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]