- vs +2.4% last forecast in Oct
The recent collapse in the global oil price is creating winners and losers worldwide – and the UK is decisively a winner. Cheaper energy will have large and wide-ranging effects on the UK economy, giving the consumer a major shot in the arm and driving inflation as measured by the Consumer Prices Index (CPI) down to an average of zero this year.
As a result we’ve revised up our forecast for UK GDP growth in 2015 to 2.9% from 2.4% in October, meaning we’re projecting acceleration from last year’s estimated growth of 2.6%, and growth is also revised up to 2.9% for next year.
And with inflation averaging zero in 2015, this will effectively put any rise in base rates on hold until next Spring. This, together with stronger real income growth will also help to boost housing activity. It’s clear that what were silver linings in a generally cloudy outlook have turned to gold
Upbeat assessment overall from the Ernst&Young think-tank but concludes:
However, it’s not all good news. The global economy has slowed and prospects for the Eurozone appear to be going from bad to worse. The euro has fallen to an all-time low against the dollar, which will help combat deflation and stimulate Eurozone exports at the expense of UK producers. Investors face the uncertainty of the UK General Election, followed by the possibility of a referendum on UK membership of the EU. Overall, the prospects have brightened – but remain very risky.
GBPUSD 1.5137 and EURGBP back down to 0.7638 in a scrappy start to the week
