Gavyn Davies’s article is an interesting attempt to explain why the UK recovery remains so weak. This analysis is also very timely given the recent prognosis by the governor of the Bank of England of sluggish growth and high inflation. One aspect that Gavyn Davies has largely omitted is an explanation of why the UK’s inflation rate has remained higher than the US. This higher level of inflation has not only caused the rate of real GDP growth to be lower relative to the US, but also consumers to feel worse off than their US counterparts. One indicator that has been strikingly different has been the difference in the cost of housing services. In the US, the collapsing housing market has in fact been an aid to recovery as the cost of housing services fell further than in the UK. The chart below shows the rate of change in the cost of housing services at exactly the point when inflation began to diverge.