1.22 UK Recovery Fears Remain Despite Growth Second quarter 2010 growth of the UK economy was at the fastest pace in 11 years. Despite this momentum, doubts remain over whether a strong recovery can be sustained. The two key components of demand that grew fastest were consumption expenditure and inventory investment. Inventory investment added 1 percentage point to growth and is at its highest since 1994.

With the effect of inventory investment likely to be short-lived and no other sources of stimulus, growth may slow.

Source: Financial Times, 28 August 2010 Explain why a rise in inventories is associated with recovery and why the contribution of inventory investment to aggregate expenditure is likely to be short-lived.