New data shows
The main UK political news since the February Review is the surprise call for a general election, to be held on 8 June.
Financial markets appear to have viewed this development positively, perhaps based on electoral polls which suggest the Conservative Party would be returned to government with an increased majority strengthening the position of the Prime Minister as the country embarks on a negotiated withdrawal from the EU.
The economy expanded by 0.3 per cent in the first quarter of 2017; a marked slowdown from the rate of growth experienced in the previous quarter. The slowdown can be largely attributed to a softening in service sector output, consistent with a moderation in consumer spending, which was the engine of growth in 2016. We expect consumer spending to remain weak throughout this year and next as rising inflation erodes the purchasing power of households.
Overall NIESER forecasts GDP growth of 1.7 and 1.9 per cent this year and next. These projected below trend growth rates are unchanged from what we published in the last Review.
Simon Kirby, head of macroeconomic modelling and forecasting at NIESR said: “GDP growth over the next couple of years will be subdued, growing at less than the economy’s long-run potential rate of two per cent per annum, but households will feel the pinch from rising consumer price inflation. The rate of inflation is expected to rise from 2.3 per cent per annum in March to almost 3.5 per cent by the end of 2017. By 2018 we expect consumer spending growth to have effectively stalled.”