U.k. economic growth likely to see upward trend in 2018, GDP growth to reach 1.8 pct by 2018-end
The U.K. economic growth is expected to be on an upward trend this year, greatly reversing the deceleration seen last year, noted Scotiabank in a research report. Particularly, growth has decelerated from 2 percent year-on-year at the beginning of last year and is expected to have risen just 1.4 percent year-on-year in the last quarter of 2017.
“We expect the pace to reaccelerate to 1.8 percent y/y by the end of 2018. So our emphasis is that 2018 will be a better year than 2017 since growth will be accelerating”, stated Scotiabank.
But the projections indicate towards an annual average growth pace of 1.6 percent year-on-year for this year, which would be a slight slowdown compared with 1.74 percent year-on-year for this year.
The growth rate slowed last year mainly due to consumer. And it is consumer that is expected to turn it around this year. The sharply rising CPI inflation last year, set against stagnant wage inflation signified that household real disposable income growth ground to a halt. In turn, this caused consumer spending growth to slow down. Fundamentals are expected to reverse this year. Especially, inflation is likely to decelerate sharply and wage inflation to accelerate. This should restore household real disposable income growth and drag consumer spending growth along with it.
“Consumer spending aside, Brexit is likely to continue to cast a shadow over some aspects of growth. Investment is likely to be the prime culprit, as firms and households hold back from big-ticket expenditure amid uncertainty about where the economy will be over the coming 18 months or so”, added Scotiabank.
Source: FXWire Commentary