This time last year, the consensus view was that the UK economy would grow by only 1% or so in 2017. But it now looks as though the economy will expand by a more reasonable 1.5%. Of course, there is a possibility that the negative effects of Brexit-related uncertainty have merely been delayed, rather than avoided. Indeed, the consensus forecast is for growth to slow a bit further in 2018.
But we’re not convinced that the economy will lose more pace. It seems just as likely that uncertainty will ease. What’s more, with the real pay squeeze set to fade next year, we see no reason why the resilience of consumer spending should come to an end. Finally, given the lengthy lags involved, a decent boost from net trade should still be forthcoming. Against this background, we’re happy to start the New Year at the optimistic end of the forecast spectrum, predicting that GDP will grow by 2.2% in 2018. We will, of course, expand on this in our UK Economic Outlook in January.
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