UK's OBR assumes recent productivity growth pickup will soon be reversed

Author: Mike Paterson | Category: News

UK Office for Budget Responsibility now publishing their report 13 March

  • much of the improvement in UK borrowing is cyclical
  • f/c for structural deficit little changed
  • estimated UK Brexit divorce bill at GBP 37.1bln of which 75% would be due within 5 years
  • UK current account deficit remains large, only modest narrowing seen
  • o/s investor confidence could be damaged by disorderly Brexit
Now Hammond's finished quoting from it the OBR can publish the full report and it's a fuller more honest assessment than the UK govt would have us believe in that cherry-picked gist just now.

GBPUSD still underpinned though as the USD wobble continues with EURUSD holding 1.2380 and USDCHF pinned down around 0.9440 support lines. USDJPY trawling around 106.95 after holding around 106.80.

GBPUSD has decent offers/res between 1.3980-00

Says the OBR:

  • CPI inflation reached 3.1 per cent in November 2017, which we expect to have been its local peak. We assume that the unwinding of last year's sterling-driven rise in import prices will bring inflation down to around 2 per cent relatively quickly and that it will remain close to that level. But higher oil and food prices mean that inflation is a little higher this year than we forecast in November.
  • Thereafter it is little changed, as the effects of slightly more cyclical momentum in the economy and higher wage growth have been offset by a stronger pound and market expectations of higher interest rates and a sharper fall in oil prices.
  • We continue to expect employment growth to slow over the next five years from the strong rates seen in much of the post-crisis period. This reflects our view that unemployment is currently just below its sustainable rate and that the ageing of the population will place downward pressure on the overall participation rate.
You can read it all here