In Britain, spending by private households constitutes 63 percent of gross domestic product (GDP). Compared to previous recessions, the spending has been remarkably weak. The purchasing power of the workers has been decreasing as the commodity prices increase. The strong employment figures are not a direct reflection of better pay. The energy bills have been rising steadily with gas rising by 10 percent in 2012 alone. Electricity cost rose by close to 6 percent in the same period. The sterling pound has depreciated against major currencies by 6 percent in 2013.
The homeowners with substantial deposits have the chance to refinance mortgages at 1.7 percent. This saves close to 2000 pounds annually (The Economist, 3). The high rate of saving and deleveraging indicates that debt-fueled spending is likely to decrease. If the saving rate fall significantly, spending is likely to be boosted leading to a GDP growth of 2.7 percent. The drop in shopping has affected the demand of goods and services. Market turbulence is expected to shift when spending starts to increase (McConnell et al, 29). The UK economy is still fragile. This means that the microeconomic trends have not stabilized.
The contents reinforce the microeconomics principles and concepts covered with regard to supply and demand forces and consumer participation. The contents of the article illustrate how the consumer spending affects the GDP in Britain. The demand for goods fell as spending fell. This had ripple effects on the supply of goods and exchange rates in the national market.