Economic U-Turn

You will be forgiven for missing a key economic announcement from the Bank of England last week given the excitement of MP’s voting in favour of commencing the notice period of Article 50 to the leave the EU and Trumps latest bemusing outburst. It was also a good news story which typically don’t get air time!

 

In short, the Bank of England made yet another dramatic rise in its growth forecast for 2017. It expects the economy to grow 2% in 2017, up from a November forecast of 1.4%, which was itself an upgrade from the 0.8% forecast made in August.

 

The raised growth forecast follows much criticism levelled at the Bank for being too gloomy when it drastically cut its growth forecast after June's vote in favour of Brexit and then subsequently cut interest rates.

 

The Bank said the improved forecast was partly the result of higher spending and investment contained in Chancellor Philip Hammond's Autumn Statement.

 

It also predicts "a significant fall in the savings ratio over the next three years as consumers take time to adjust spending growth to weaker income flows". The savings rate is expected to fall to 4%, the lowest rate since records began in the early 1960s.

 

Or to put that another way……we will continue to spend until inflation bites us on the bum later down the road.

 

So in the short term, the UK economy in 2017 looks reasonably good. Just the EU political malarkey to sort now!