UK economy: GDP growth returns to positive territory
WEDNESDAY
17 OCTOBER 2012
•
GDP will decline by 0.3% in 2012 but on a quarterly basis
growth should return topositive territory in H2
. The economy will expand by 1.3% in 2013 which is close to ourassessment in
August
Nordic Outlook as well as the IMF’s new forecast of 1.1%.
•
Headline inflation fell to 2.2% in September which was the lowest print since the end of2009. Meanwhile core inflation held steady at 2.1%. Going forward
we expect inflation
to edge lower and stay
below the inflation target of 2% for the most part in 2013-14
.
•
The strong employment growth is surprising since GDP growth has been weak, but theOlympics have boosted the figures. Going forward, we expect
employment growth torun out of steam and the unemployment rate to edge higher again
.
•
Sluggish growth and inflation below the inflation target in the medium term suggest that
Bank of England will expand its asset purchase program again before yearend
.
Mattias Bruér
mattias.bruer@seb.seSEB Economic Research
Key data
Percentage change
2011 2012 2013 2014
GDP* 0.9 -0.3 1.3 1.6Unemployment
**
8.2 8.2 8.4 8.5Inflation* 4.5 2.7 1.8 1.5Government deficit** -8.5 -8.2 -7.3 -5.8
* Percentage change, ** Per cent of labour force, *** Per cent of GDPSource: SEB
2
Economic Insights
•
Consumer confidence is at its highest level since 2011 but
confidence in the household sector is muchlower compared to most business surveys
. Meanwhile in the manufacturing sector PMI fell to 48.4 inSeptember and the services PMI fell as well but remains well above 50. That being said, since the beginning ofSeptember
economic data has generally surprised on the high side
.
•
According to the housing price indices we follow the year-on-year trends have been broadly flat since 2010.But since inflation has been relatively high,
in real terms UK house prices are actually deflatingsignificantly
.
•
Reflecting the Olympic Games and the extra bank holiday, economic activity has been volatile in recentmonths. But compared to May – the last data point unaffected by distortions – both industrial production andexports are weaker today.
A GDP bounce-back in Q3 notwithstanding, what this is suggesting is that theunderlying trend is still weak.
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Macro Update: UK economy returns to growth
SEB’s economists forecast that UK’s GDP will decline by 0.3 per cent in 2012 but that on a quarterly basis growth should return to positive territory in the second half. The economy will expand by 1.3…
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