United Kingdom Economic Forecast

UK Economic Forecast

June 26, 2018

The economy appears to have regained some momentum in the second quarter following a weak first quarter, but growth is still mediocre at best. Both the manufacturing and services PMIs picked up in May, although weak new orders growth and gloomier business sentiment bode poorly for the evolution of the services PMI going forward. In addition, consumer sentiment improved in the same month, while in February–April employment continued to surge. On the downside, most new jobs were part-time, with total hours worked declining slightly. In addition, the tight labor market is still not feeding through to significantly higher pay—likely driven by weak productivity. On the political front, Brexit negotiations are making little headway on the key sticking point of the Irish border ahead of an important EU summit at the end of June. This comes against a backdrop of disagreement in parliament over MPs’ role in the Brexit process.

United Kingdom Economic Growth

Looking ahead, growth will remain muted, with fixed investment dampened by Brexit uncertainty and export growth slowing after the boost provided last year by the weaker pound. However, a slight pick-up in government spending and a loose monetary stance should support the economy. Our panelists estimate GDP growth of 1.4% in 2018, unchanged from last month’s forecast, and 1.5% in 2019.

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United Kingdom Facts

Bond Yield1.26-3.04 %Jul 17
Exchange Rate1.31-0.35 %Jul 17
Stock Market7,626-0.26 %Jul 17

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