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UK > Economy & sectors > Knowledge Base > Overview_Jan > Macroeconomy > The UK Forecast

The UK Forecast

Average Earnings

The weak labour market is expected to lead average earnings growth to decelerate further in 2010, but a pick-up is expected in 2011 and 2012. (Read more...)

Household spending

UK consumer credit continues to fall as households reduce their debt burden. Consumer confidence has picked up from the low of early 2009, but remains subdued. Household spending is expected to grow only slightly in 2010, before recovering in 2011. In the recovery, household spending is expected to grow more slowly than historical rates. (Read more...)

Inflation

Inflation remained high during 2010H1 but is expected to decelerate in 2010H2, and to move towards the 2% target in 2011 and 2012. (Read more...)

Investment

Investment is expected to rise through 2010. However, the weak nature of the recovery, coupled with the scale of the fall in investment in 2009 means that investment for 2010 as a whole will be around ¼% higher than in 2009.

The recovery in investment will be weak in comparison to similar periods in previous economic cycles. Manufacturers and private services are holding off investing until the underlying strength of demand become more certain while banks' lending criteria remain cautious.  Public sector investment is the first area of public spending to see substantial cuts.

(Read more...)

Manufacturing

Manufacturing output is forecast to grow by 3½% in 2010 but to decelerate in 2011 as a result of weak domestic demand and slower export growth. (Read more...)

Market services

Market services is forecast to grow only modestly in 2010 but to accelerate in 2011 and 2012, led by Banking & Finance, Communications and Computing Services. (Read more...)

Outlook for components of demand

UK GDP is expected to grow by 1¼% in 2010, supported by a sharp turnaround in inventory accumulation. Improved trade and a recovery in household spending will support an acceleration of GDP growth in 2011, offsetting the impact of declining government consumption. (Read more...)

Sectoral summary

GVA is expected to show a modest recovery in 2010 and to accelerate in 2011 thanks to rebounds in manufacturing, transport & communications and financial & business services. But the recovery in construction is expected to lag behind that in other sectors, as public infrastructure spending is cut. (Read more...)

The Nature of the Recovery: More W than V

Households and firms have reacted particularly sharply in this recession, cutting spending and borrowing more sharply than in the last recession.  Some triggers of the recession can be reversed equally sharply, such as the stockbuilding cycle. But household indebtedness and public sector retrenchment will weigh heavily on growth in the medium term. (Read more...)

Trade

Net trade will curb UK GDP growth in 2010, but it is expected to contribute to the UK economic recovery in 2011 and 2012. (Read more...)

UK employment and productivity forecast

The public sector is the only sector to have seen employment rise during the recession in 2009 and continued to grow in 2010.  All other sectors have seen employment fall in 2009, particularly manufacturing and construction.  High-skilled and low-skilled workers have been equally affected. This trend continued in 2010 except in the transport & communications sector that has seen employment numbers rising. (Read more...)

UK employment forecast by type of employment

The rise in self-employment in response to the recession has been smaller than expected, while male part-time employment is the only category of employment to have risen.  Nevertheless, employment and self-employment are forecast to fall in 2010 and 2011. (Read more...)

UK: recent GDP growth

In the last quarter of 2009 the UK emerged from its longest recession since quarterly data were first collected in 1955, after six consecutive quarters of a continuous quarter-on-quarter fall in GDP. This upswing was sustained in the first quarter in 2010. (Read more...)

UK: recent output by sector

The recovery in output weakened in 2010Q1, and declined in distribution, retailing & hotels.

(Read more...)

UK: recent price inflation

In the beginning of 2010, average earnings inflation in the UK saw strong growth while CPI inflation continued to rise. (Read more...)

UK: recent trade performance

UK trade volumes picked up towards the end of 2009 when world trade recovered somewhat, but UK exports fell back a little in the first quarter of 2010.

(Read more...)

Unemployment to pick up in slow recovery

We expect slower growth in the period 2012-15 than the Office for Budget Responsibility, as the impact of fiscal retrenchment in the UK and other countries with a substantial public sector deficit depresses their domestic spending.  Given what we consider to be reasonable views on the outlook for productivity growth and hence jobs in the public and private sectors, and for in-migration, the implication is that unemployment will rise again and not begin to fall until after 2015. (Read more...)

Utilities

There will be modest output growth in Energy and Water in 2010 but longer-term growth is forecast to remain subdued owing to rationalisation in utilities and the decline in production from the UK Continental Shelf. (Read more...)