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The UK economy will grow slower than previously expected this year and next, as continued supply chain turmoil and rising prices slow growth.
So this morning I warn the EY Item Club. That’s because we predict that the “tougher” part of recovery will depend on us.
Fall forecasts warn that “higher and more sustainable inflation”, recent rises in energy prices, and intensifying supply chain turmoil mean that recovery is not as strong as expected.
EY currently expects UK GDP to rise 6.9% from its 7.6% forecast this summer. [but still the best year since 1941, after last year’s near-10% plunge]
However, growth in 2022 is also low, down from the previous forecast of 6.5% to 5.6%.
By 2023, growth will return to 2.3% and will drop to 1.8% in 2024 and 2025.
Martin Beck, Chief Economic Advisor EY Item Club,To tell:
“With the boost from the resumption of the economy almost gone, Britain was always expected to enter a tougher stage of recovery.
Record growth is still projected, but there will be sustained headwinds towards the end of the year. With the withdrawal of pandemic-related policy support, supply chain disruptions and shortages are more serious than expected, leaving room for catch-up growth. It was used up.
EY has lowered its consumer spending forecast this year from 4.8% to 3.9% and next year from 7.4% to 6.8% as households are under pressure from inflation.
Beck warns that household income is not keeping up with rising prices.
“Inflation peaks higher than originally expected and appears to remain high for longer, but it is unlikely that this will turn into’stagflation’, a combination of low growth and sustained high inflation. ..
Inflation will probably contribute to a decline in real household income around the beginning of the year, slowing the recovery of consumer spending and slowing the strong recovery seen in early 2021.
But there are still optimistic reasons, EY believes that the success of the layoff system will increase the unemployment rate less than feared.
The unemployment rate is expected to peak at 4.6% early next year.P from 4.3% in the previous quarter.. In July, EY predicted that the unemployment rate would peak at 5.1% after layoffs in the second half of this year.
“Despite these challenges, the UK economy has made some significant progress in regaining pandemic-related losses, and the recovery has never lost momentum. Overall, the economy is this year. Recovered much faster than expected at the beginning of.
There is also a clear basis for economic optimism. Not all households have been able to save more in the last year or so, but the accumulation of household savings means that consumers are in a good position overall. Meanwhile, the labor market is healthy and companies are building a solid balance sheet. The long-term financial scars of a pandemic can be minimized. “
But … the pandemic risk of Europe has not been eliminated as Austria awakens to its fourth national blockade.
Austria’s 20-day national partial blockade is the toughest in the west Europe For months, Vienna mandated vaccinations for everyone from February and urged protests over the weekend.
Travel stocks are under pressure on Friday after the Austrian blockade was announced, as investors are concerned that new regulations this winter could undermine Europe’s recovery.
Analyst MUFG Bank say:
Market participants are becoming more afraid of downside risks to European growth.
The latest wave of COVID has already urged policy makers to tighten restrictions. It has joined the shock of energy prices, geopolitical tensions with Russia, and the development of the currency crisis in Turkey, and is on the list of concerns for European investors.
In contrast, the US economy is regaining upward momentum and the Fed’s communications are becoming more hawkish.
- Greenwich Mean Time 11:00 am: Deutsche Bundesbank Monthly Report
- Greenwich Mean Time 1:30 pm: October Federal Reserve Bank of Chicago National Activity Index
- Greenwich Mean Time 3:00 pm: Eurozone Consumer Confidence Flash Estimate in November
- Greenwich Mean Time 3:00 pm: Existing U.S. Home Sales in October
Britain’s economic recovery is slower than expected.Pandemic Concerns Squeeze Euro – Business Live | Work
Source link Britain’s economic recovery is slower than expected.Pandemic Concerns Squeeze Euro – Business Live | Work