Week 48, 2011: The UK Economy

Summary: Next week the ERC hosts the first annual Clash of the Titans, where professors from the top three economics departments in the country will give their predictions on what will happen over the next year, so we've looked back at the UK economy over the past couple of years.

What does the chart show? The red line shows the percentage change in quarterly Gross Domestic Product (GDP) on the previous quarter. The blue line shows the CPI measure of inflation as a percentage change on the previous year, averaged over a quarterly period. The yellow line shows the seasonally adjusted, quarterly, unemployment rate for all those aged 16 and over. And finally, the green line shows the quarterly average of the official Bank of England interest rate.

Why is the chart interesting? These four measures, along with a question on what the peak of French bond yields will be, are the ones that will be predicted by the three professors on Tuesday. Past trends seem to suggest that inflation and unemployment are on their way up, with GDP growth and interest rates remaining low, but there are a couple of things for the professors to consider. For example, will the Bank of England raise interest rates at some point over the next year in an attempt to curb rising inflation? What side effect might that have on growth, and will it work in bringing inflation down? At what point will unemployment reach a peak and start to drop?