United Kingdom Economic Forecast

UK Economic Forecast

January 29, 2019

Recent data suggests the economy performed poorly in the fourth quarter. GDP growth in September–November was the slowest in six months on the back of a contraction in the manufacturing sector, while the services PMI was only just in expansionary territory in December amid soft new business. Moreover, retail sales were limp in the final quarter, which came against a backdrop of worsening consumer sentiment amid rising Brexit uncertainty. Weakness within the retail sector also came despite the robust labor market, which remains the economy’s bright spot: In September-November, employment surged and nominal wage growth topped 3%. On the political front, in mid-January the government’s Brexit withdrawal agreement was rejected by an overwhelming majority in parliament. The government has announced its intention to tweak the existing deal, although an end to the impasse does not appear imminent.

United Kingdom Economic Growth

Private investment and household consumption will likely remain subdued over the next few months due to the lack of clarity over Brexit. However, company stockpiling in preparation for a no-deal scenario could provide temporary support to GDP growth in Q1. Looking further ahead, everything hinges on the outcome of Brexit; leaving the EU with a deal, or remaining in the EU, would likely unleash pent-up investment and boost consumer sentiment, while leaving with no deal could cause a serious economic shock. Our panelists expect GDP growth of 1.4% in 2019, down 0.1 percentage points from last month’s forecast, and 1.5% in 2020.

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United Kingdom Facts

Bond Yield1.25-3.04 %Jan 30
Exchange Rate1.31-0.35 %Jan 30
Stock Market6,942-0.26 %Jan 30

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