Looming stagflation - A blog clearly shows the position the economy faces

13th August 2022

The Pearson blog publishes items from several contributors.

This one is by [John Sloman and is a very clear explanation of the problems faced by the economy.

Aggregate demand has been booming as the world bounces back from the pandemic. At the same time, aggregate supply is severely constrained. These supply constraints are making potential national income smaller - at least temporarily. The result is that many countries are heading for recession.

At the same time, supply constraints are causing prices to rise, especially energy and food prices. This cost-push inflation is made worse by the rises in aggregate demand.

The result is ‘stagflation' - a recession, or stagnation, accompanied by high inflation. In the UK, the latest Bank of England Monetary Policy Report forecast that by the end of 2022, CPI inflation would be 13.1% and that in 2023, real GDP would fall by 1.5%.

John has been at the centre since its beginning in 1999/2000, and led it until his retirement in July 2012. He was formerly Head of School of Economics at the University of the West of England and is now Visiting Professor at UWE.

Read the full blog item HERE