United Kingdom Economic Forecast

UK Economic Forecast

December 20, 2018

The economy appears to have lost momentum in the final quarter. In the three months to October, GDP growth slowed on lower car sales and a softer pharmaceutical sector, while retail sales declined in month-on-month terms for the second straight month in October. Meanwhile, in November the services PMI slipped to an over two-year low, due to slower expansions in new orders and employment, while sentiment among consumers worsened. In contrast, the labor market remains a bright spot; in the three months to October, employment growth was solid, while nominal wage growth reached a near-decade high. On the political front, Prime Minister Theresa May recently called off the vote on the Brexit withdrawal agreement scheduled for 11 December, due to a lack of parliamentary support. She subsequently survived a no-confidence motion tabled by Conservative MPs. The intensifying political uncertainty is likely to depress investment in the months ahead.

United Kingdom Economic Growth

Growth should be fueled next year by the looser fiscal stance and higher wages boosting private consumption. However, private fixed investment will likely remain subdued until there is greater clarity on the Brexit front. A failure to ratify the EU withdrawal deal before the UK departs the bloc in March 2019 is the key downside risk. Our panelists expect GDP growth of 1.5% in 2019, unchanged from last month’s forecast, and 1.5% again in 2020.

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United Kingdom Facts

Bond Yield1.31-3.04 %Jan 16
Exchange Rate1.29-0.35 %Jan 16
Stock Market6,863-0.26 %Jan 16

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