UK economic growth: Elusive rebalancing – RBS

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 28, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Ross Walker, Senior UK Economist at RBS, suggests that their forecast for UK GDP growth of 2.0% in 2016 is a little below trend but would hardly amount to a crisis.

    Key Quotes

    “By international standards, the UK would remain one of the faster growing developed economies. In essence, we depart from the more optimistic City consensus because we perceive the risks across the main GDP demand components to be more clearly skewed to the downside: the tax and benefit hit to household income, the resumption of fiscal tightening exerting a further squeeze on departmental spending, Brexit risk leading to a postponement of capex and hiring and the deterioration in global trade and sterling’s appreciation dampening export growth.”

    “The other aspect is evidence that some of the UK’s economic imbalances are resurfacing, more apparent from an output data perspective: a manufacturing sector back in recession, a financial services sector still wrestling with structural decline and anaemic public services growth – we are sceptical that these trends are about to reverse. That leaves GDP growth increasingly reliant on sectors such as real estate and consumer-facing services, which do not obviously provide a sturdy basis for rebalancing and sustained growth. Unbalanced growth is preferable to no growth, but recognition of the limits imposed by a still heavily-indebted household sector, and the extent to which services revolving around the property market can continue to drive growth, is warranted.”
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