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Our latest forecasts Outlook for UK economy March 2017 Mauricio Armellini Households The labour market Exchange rate and prices Key judgments @BoENorthEast Our latest forecasts Households The labour market Exchange rate and prices Key judgments North East Agency GDP forecast – November 2016 North East Agency GDP forecast – February 2017 North East Agency Why the upgrade? In decreasing order of importance: • Easier fiscal policy: half of upgrade • Stronger outlook for global economy: 25% of upgrade • Supportive financial conditions in the UK • Strong household consumption North East Agency Unemployment forecast – February 2017 North East Agency CPI inflation forecast – February 2017 North East Agency Market’s expectations for interest rates North East Agency Sources: Bank of England, Bloomberg, European Central Bank (ECB) and Federal Reserve. Market’s expectations for interest rates North East Agency Sources: Bank of England, Bloomberg, European Central Bank (ECB) and Federal Reserve. Market’s expectations for interest rates North East Agency Sources: Bank of England, Bloomberg, European Central Bank (ECB) and Federal Reserve. Our latest forecasts Households The labour market Exchange rate and prices Key judgments North East Agency Consumption and real income growth North East Agency Consumer credit growth North East Agency Credit and consumption growth North East Agency Sources: Bank of England, Finance & Leasing Association, ONS and Bank calculations. Our latest forecasts Households The labour market Exchange rate and prices Key judgments North East Agency 13 5 Oct 10-Dec10 Dec10-Feb11 Feb11-Apr11 Apr 11-Jun11 Jun11-Aug11 Aug11-Oct11 Oct 11-Dec11 Dec11-Feb12 Feb12-Apr12 Apr 12-Jun12 Jun12-Aug12 Aug12-Oct12 Oct 12-Dec12 Dec12-Feb13 Feb13-Apr13 Apr 13-Jun13 Jun13-Aug13 Aug13-Oct13 Oct 13-Dec13 Dec13-Feb14 Feb14-Apr14 Apr14-Jun14 Jun14-Aug14 Aug14-Oct14 Oct14-Dec14 Dec14-Feb15 Feb15-Apr15 Apr15-Jun15 Jun15-Aug15 Aug15-Oct15 Oct15-Dec15 Dec15-Feb16 Feb16-Apr16 Apr16-Jun16 Jun16-Aug16 Aug16-Oct16 Oct16-Dec16 Unemployment rate (%) Headline figures Unemployment rate 13 12 12 11 11 10 10 9 9 8 8 7 7 6 6 North East Quarter UK 5 4 4 North East Agency Headline figures North East Unemployment rate (%) Number of unemployed Decrease as % of current stock Contribution to UK decrease Nov15-Jan16 7.8 101,812 Nov16-Jan17 6.8 87,578 UK Change -1.0 -14,233 -16% 13% Nov15-Jan16 5.1 1,690,540 Nov16-Jan17 4.7 1,584,214 North East Agency Change -0.3 -106,326 -7% Wage growth hasn’t picked up as projected… Why? North East Agency …because… • Low productivity growth → low wage increases • Lower inflation → less pressure on companies to increase wages • Slack may be higher than previously thought. Equilibrium unemployment rate down from 5% to 4.5%. North East Agency Our latest forecasts Households The labour market Exchange rate and prices Key judgments North East Agency Import price inflation North East Agency Food CPI and food import prices North East Agency Contributors to CPI inflation North East Agency Our latest forecasts Households The labour market Exchange rate and prices Key judgments North East Agency Three crucial judgements for forecasts • Cheaper sterling continues to boost consumer prices without affecting inflation expectations • Regular pay growth remains modest, consistent with our updated assessment of slack • Household spending growth slows as real income gains weaken North East Agency Q&A @BoENorthEast [email protected] Our latest forecasts Households The labour market Exchange rate and prices Key judgments North East Agency
