UK economic forecast
The latest EY ITEM Club forecast has cut its GDP growth projections to 1.3% for 2019 (from 1.5% in the EY ITEM Club Winter Forecast) and 1.5% for 2020 (down from 1.7%). Despite likely solid-looking GDP growth in the first quarter of 2019, the downward revision for 2019 primarily reflects the prolonged Brexit uncertainty, following the decision to delay the UK’s exit from the EU to a flexible 31 October deadline. A weaker global economic environment has also impacted the UK’s growth outlook.
After an unexpectedly resilient performance last year, which seemingly extended into Q1 2019, the EY ITEM Club forecasts consumer spending growth to slow in the near term. Consumer spending is expected to grow by 1.4% in 2019 and 1.7% in 2020. According to the Forecast, consumer price inflation is expected to average at 1.9% in 2019 before rising to 2.0% in 2020. Meanwhile earnings growth is projected to be 3.2% in both 2019 and 2020.
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EY ITEM Club Spring Forecast 2019: Roundup
Listen to EY’s UK Chief Economist, Mark Gregory, as he examines the findings of the Spring Forecast.
A notable feature of the economy in 2018 and Q1 2019 was how resilient consumer spending was compared to other sectors. This was underpinned by robust employment growth and improving real earnings growth, particularly since mid-2018. A key question for UK growth prospects is whether this can continue."
The outlook for the UK economy remains incredibly difficult to forecast. Brexit is one factor but the different and contradictory behaviour of individual components such as consumers and businesses means market signals are very hard to understand and there is a real risk of misinterpretation. Businesses therefore need to be ready to respond as conditions change, which means investing time and resources into tracking the market, with a particular focus on the regular updates on employment numbers, pay, and inflation. These often provide the best warning signs of how businesses and consumers are faring."