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United Kingdom Economic Forecast

United Kingdom Economic Outlook

After modest growth in Q2, GDP fell 0.5% month on month in July—more than twice as steep a fall as markets had forecast. Output fell in services, manufacturing and construction, though a tough base effect and industrial action were partly to blame, and monthly GDP data has been highly volatile recently. As such, underlying momentum was likely stronger than the headline fall suggested. That said, PMI data then pointed to deteriorating private-sector operating conditions in August amid elevated borrowing costs. In September, the UK agreed to rejoin the EU’s over USD 100 billion Horizon Europe research program in 2024, boding well for UK research output. Further sector-by-sector deals with the EU are possible ahead, though a return to the Single Market or customs union appears unlikely, particularly as opposition leader and current election favorite Kier Starmer has ruled out such a move.

United Kingdom Inflation

Inflation fell to 6.7% in August from 6.8% in July, below market expectations. That said, inflation was still far above the BoE’s 2% target rate. Inflation is seen trending down from current levels by year-end thanks to a favorable base of comparison, but will still average over double the Bank’s target on high wage growth and the recent rise in energy prices.

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

United Kingdom Economic Data

2018 2019 2020 2021 2022
Population (million) 66.4 66.8 67.1 67.3 67.8
GDP (USD bn) 2,870 2,850 2,699 3,141 3,087
GDP per capita (USD) 43,200 42,671 40,235 46,690 45,544
GDP (GBP bn) 2,152 2,234 2,104 2,284 2,506
Economic Growth (Nominal GDP, ann. var. %) 3.4 3.8 -5.8 8.5 9.7
Economic Growth (GDP, ann. var. %) 1.4 1.6 -10.4 8.7 4.3
Domestic Demand (ann. var. %) 1.4 1.9 -11.9 9.1 4.7
Private Consumption (ann. var. %) 2.0 1.1 -13.2 7.4 5.2
Government Consumption (ann. var. %) 0.6 4.0 -7.9 14.9 2.5
Fixed Investment (ann. var. %) -0.5 2.2 -10.8 7.4 7.9
Exports (G&S, ann. var. %) 3.1 2.0 -11.5 4.9 8.6
Imports (G&S, ann. var. %) 3.1 2.7 -16.0 6.1 14.1
Industrial Production (ann. var. %) 3.3 2.3 1.3 7.3 -2.8
Retail Sales (ann. s.a. var. %) 2.4 3.2 -1.8 5.3 -3.3
Home Prices Index (ann. var. %) 3.3 0.9 2.8 8.8 9.8
Disposable Income (ann. var. %) 2.0 2.1 -0.5 1.4 -1.4
Wages (ann. var. %) 2.9 3.4 1.8 5.9 6.1
Unemployment (% of active population, rolling qt) 4.0 3.8 5.2 4.0 3.7
Unemployment (% of active population, aop) 4.1 3.8 4.6 4.5 3.7
Fiscal Balance (% of GDP) -2.3 -2.5 -13.1 -8.0 -4.7
Public Debt (% of GDP) 86.3 85.7 105.8 105.3 100.4
Money (ann. var. of M2 %) 3.8 3.9 14.3 6.6 3.0
Inflation (CPI, ann. var. %, eop) 2.1 1.3 0.6 5.4 10.5
Inflation (CPI, ann. var. %, aop) 2.5 1.8 0.9 2.6 9.1
Inflation (PPI, ann. var. %, aop) 3.4 1.4 -1.0 5.2 16.0
Bank Rate (%, eop) 0.75 0.75 0.10 0.25 3.50
SONIA Rate (%, eop) 0.70 0.71 0.04 0.19 3.43
10-Year Gilt Yield (%, eop) 1.27 0.82 0.20 0.97 3.67
Exchange Rate (USD per GBP, eop) 1.27 1.32 1.37 1.35 1.20
Exchange Rate (USD per GBP, aop) 1.33 1.28 1.28 1.38 1.23
Exchange Rate (EUR per GBP, eop) 1.11 1.18 1.12 1.19 1.13
Exchange Rate (EUR per GBP, aop) 1.13 1.14 1.13 1.16 1.17
Current Account Balance (USD bn) -113 -77 -77 -15 -96
Current Account Balance (% of GDP) -3.9 -2.7 -2.9 -0.5 -3.1
Merchandise Trade Balance (USD bn) -191 -189 -171 -233 -284
Foreign Direct Investment (USD bn) 87.8 53.9 58.2 -71.2 14.1

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