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United Kingdom Economic Forecast

United Kingdom Economic Outlook

The economy likely had a muted performance in Q1. After strong growth in January, GDP flatlined in February, dampened by public-sector strikes and warm weather capping the power sector. Moreover, retail sales contracted more than expected in March, suggesting a tepid end to the quarter. Turning to Q2, available data is largely promising. In April, the private-sector PMI rose to a one-year high thanks to stronger services activity—particularly related to travel, leisure and entertainment. In the same month, consumer confidence recorded the best reading since February 2022, which, together with the recent extension of the energy price cap through June, bodes well for private spending. That said, PMI data suggests that the manufacturing sector remains in a tough spot amid falling exports and destocking by firms.

United Kingdom Inflation

Inflation ticked down to 10.1% in March from February’s 10.4% but was well above market expectations. Price pressures will ease later this year on a tougher base effect. Moreover, the extension of the energy price cap through June will tame energy prices this quarter. However, inflation will remain above the Bank of England’s (BoE) 2.0% target in 2023.

This chart displays Economic Growth (GDP, annual variation in %) for United Kingdom from 2013 to 2022.

United Kingdom Economic Data

2017 2018 2019 2020 2021
Population (million) 66.0 66.4 66.8 67.1 67.3
GDP (USD bn) 2,685 2,877 2,856 2,706 3,122
GDP per capita (USD) 40,654 43,303 42,755 40,337 46,407
GDP (GBP bn) 2,085 2,157 2,238 2,110 2,270
Economic Growth (Nominal GDP, ann. var. %) 4.3 3.5 3.8 -5.8 7.6
Economic Growth (GDP, ann. var. %) 2.4 1.7 1.6 -11.0 7.6
Domestic Demand (ann. var. %) 1.5 1.8 1.9 -12.3 8.8
Private Consumption (ann. var. %) 1.9 2.5 1.1 -13.2 6.2
Government Consumption (ann. var. %) 0.4 0.3 4.1 -7.3 12.5
Fixed Investment (ann. var. %) 3.5 -0.2 1.9 -10.5 6.1
Exports (G&S, ann. var. %) 6.8 3.1 1.7 -12.1 2.2
Imports (G&S, ann. var. %) 3.3 3.3 2.6 -16.0 6.2
Industrial Production (ann. var. %) -0.2 3.3 2.3 1.3 7.3
Retail Sales (ann. s.a. var. %) 1.8 2.4 3.2 -1.8 5.2
Home Prices Index (ann. var. %) 4.5 3.3 0.9 2.8 8.8
Disposable Income (ann. var. %) 1.1 2.4 2.1 -1.3 1.2
Wages (ann. var. %) 2.3 3.0 3.4 1.8 5.9
Unemployment (% of active population, aop) 4.4 4.1 3.8 4.6 4.5
Fiscal Balance (% of GDP) -2.5 -2.2 -2.5 -13.1 -8.0
Public Debt (% of GDP) 86.6 86.1 85.5 105.6 105.9
Money (ann. var. of M2 %) 3.1 3.8 3.9 14.3 6.6
Inflation (CPI, ann. var. %, eop) 3.0 2.1 1.3 0.6 5.4
Inflation (CPI, ann. var. %, aop) 2.7 2.5 1.8 0.9 2.6
Inflation (PPI, ann. var. %, aop) 3.9 3.4 1.4 -1.0 5.2
Bank Rate (%, eop) 0.50 0.75 0.75 0.10 0.25
SONIA Rate (%, eop) 0.41 0.70 0.71 0.04 0.19
10-Year Gilt Yield (%, eop) 1.19 1.27 0.82 0.20 0.97
Exchange Rate (USD per GBP, eop) 1.35 1.27 1.32 1.37 1.35
Exchange Rate (USD per GBP, aop) 1.29 1.33 1.28 1.28 1.38
Exchange Rate (EUR per GBP, eop) 1.13 1.11 1.18 1.12 1.19
Exchange Rate (EUR per GBP, aop) 1.14 1.13 1.14 1.13 1.16
Current Account Balance (USD bn) -96.9 -117.1 -80.8 -86.6 -46.9
Current Account Balance (% of GDP) -3.6 -4.1 -2.8 -3.2 -1.5
Merchandise Trade Balance (USD bn) -181.8 -191.1 -189.1 -171.3 -232.7
Foreign Direct Investment (USD bn) 96.4 87.8 45.5 18.2 27.6

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