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September 11 one year on Monday, 2 September, 2002, 09:20 GMT 10:20 UK
UK economy 'not out of woods'
LLanwern steel works, Wales
UK industry is still shedding jobs

Far be it from me to quote Charles Dickens, but as far as the UK economy has been concerned in the past year, one can only say they were the best of times, they were the worst of times.

The best of times because Britain has enjoyed a consumer boom (so far household spending is 3.9% higher than last year), a surge in house prices, and the lowest unemployment of any of the big industrial nations.

And by a narrow margin the UK avoided a recession (although growth was only 0.1% in the six months between October to March).

The housing boom continued unabated
The housing boom continued unabated
That is a very long way from the kind of crisis people were talking about in the aftermath of the attacks on the Twin Towers.

There can be little doubt that the economic impact of the terrorist attacks on the UK economy was very modest - mostly affecting specific sectors like aviation, tourism and insurance.

Overseas visits to the United Kingdom fell by 9% for 2001, with a big drop after September 11.

But for all the so-called good news, for all the "va va voom" in the UK economy's performance over the past year, there is still a very strong air of gloom around.

Bad times

It has been the worst of times in the stock market, which is well down - by 21% for the year to date.

It has been a truly awful year for company investment (down over 5% on a year ago).

The City is in the midst of a job-shedding frenzy, albeit a quiet one.

And so is manufacturing industry, hurt by weaker exports to US and European markets.

These good times and bad times of the past year have co-existed, but they have not done so by coincidence.

The two are inextricably linked.

Boom to bust

The financial market boom and the investment boom of the late nineties led to the inevitable bust which has been so apparent in the last year.

That bust promoted drastic cuts in interest rates, and this prompted the housing and consumer booms that have kept the economy going at a tolerable rate.

Hence, what we have seen in the past year is loose monetary policy cause the baton to pass from an old boom that had expired, to a new one.

That has given us the simultaneous bad side and good side to the economic story.

Both sides represent the aftermath not of September 11, but of the US-led stock market boom.

Obviously one lesson of this experience is that monetary policy can work - it was those interest rate cuts made within days of 11 September that caused the mini-boom.

Indeed, it is fair to say that one of the most important economic effects of the terrorist attacks might have been that they provoked early central bank action to stimulate the big economies.

And paradoxically, it happened just at a time when the economies needed pre-emptive action for reasons quite unrelated to the attacks themselves.

Future worries

But this analysis tells us that we are not out of the woods yet.

The very fact that we have moved from one boom to another over the past year is an indication that things are not quite right yet.

Only when house prices that are too high and savings that are too low come back into line with their long term averages, will we know that the hangover of the nineties has passed.

We seem a long way from that right now.


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23 Aug 02 | Business
22 Aug 02 | Business
01 Aug 02 | Business
08 Aug 02 | Business
17 Apr 02 | Business
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