Download Economic outlook FIG. 1 FIG. 2

Economic outlook
FIG. 1 REAL GDP – ANNUAL GROWTH
FIG. 2 REAL GDP – INDEX (2007 = 100)
%4
112
2.9
3 2.6
2
1.5
2.2
2.0
1
2.2
2.0
1.2
106
105.0
102.1
102
-0.5
100.0 99.5
100
-2
98.7
98
-3
96
-4
-5
107.3
108
104
0
-1
109.4
110
-4.2
-6
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
95.4
99.9
96.8
94
92
90
2007 2008 2009
2010
2011
2012
2013
2014
2015 2016F
Source: ONS, ICAEW forecasts
Our forecast for GDP growth in
2016 has been revised down from
2.1% to 2.0%. The early part of
the year has seen significant
turbulence in financial markets,
but ICAEW leading indicators
point to a much more modest
loss of momentum than that
implied by markets. Growth
should become more balanced,
with the mini-consumer boom
expected to fade and export
prospects to improve.
Economic growth accelerated from
0.4% to 0.5% in the fourth quarter
of 2015, according to data from the
Office for National Statistics (ONS).
However, this completed a year
in which the performance of the
economy underwhelmed, with growth
in each quarter being below the longterm trend.
Furthermore, there has been a
significant divergence in fortunes at
the sectoral level. The services sector
has continued to benefit from the
strength of consumer spending and
accounted for all of the economic
growth in Q4. By contrast, industrial
production contracted by 0.5%,
heavily influenced by the continued
poor performance of exporters, while
construction output fell by 0.4%.
There has been significant turbulence
in financial markets since the
icaew.com/ukeconomicforecast
beginning of the year, but while
ICAEW leading indicators have
deteriorated a little, they point
to a much more modest loss of
momentum than markets imply. In
particular, the BCM confidence index
fell from 15.6 in Q4 2015 to 11.4
in Q1 2016; while this represents a
three-year low, it is still some way
above the levels seen at the height
of the eurozone crisis. As such, we
have revised down our 2016 growth
forecast from 2.1% to 2.0%.
The BCM results also suggest that
growth should become slightly better
balanced over the coming year.
Firms expect a recovery in export
sales, no doubt supported by the
recent weakening of sterling, while
retailers’ confidence has deteriorated
appreciably, suggesting that they
expect the mini-consumer boom to
come to an end.
4