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| UK growth will slow as consumer spending is squeezed, forecasts PwC | UK growth will slow as consumer spending is squeezed, forecasts PwC |
| (6 months later) | |
| Economy likely to cool in next two years because of rising inflation arising from weak pound, consultancy predicts | |
| Larry Elliott Economics editor | |
| Tue 18 Jul 2017 06.01 BST | |
| Last modified on Mon 27 Nov 2017 19.59 GMT | |
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| Record levels of employment will fail to prevent the economy’s growth rate slowing this year and next during a period when consumer spending will be squeezed by rising inflation and falling living standards, the consultancy firm PwC has predicted. | Record levels of employment will fail to prevent the economy’s growth rate slowing this year and next during a period when consumer spending will be squeezed by rising inflation and falling living standards, the consultancy firm PwC has predicted. |
| PwC said action by the chancellor, Philip Hammond, in his autumn budget would help offset weaker household spending and delayed investment by firms anxious about Brexit. | PwC said action by the chancellor, Philip Hammond, in his autumn budget would help offset weaker household spending and delayed investment by firms anxious about Brexit. |
| But it said the economy’s growth rate was still expected to dip from 1.8% in 2016 to 1.5% this year and to 1.4% in 2018. | But it said the economy’s growth rate was still expected to dip from 1.8% in 2016 to 1.5% this year and to 1.4% in 2018. |
| John Hawksworth, the chief economist at PwC, said: “Brexit-related uncertainty may hold back business investment, but this should be partly offset by planned rises in public investment. Fiscal policy could also be further relaxed in the 2017 autumn budget to offset the ongoing real squeeze on household spending power. | John Hawksworth, the chief economist at PwC, said: “Brexit-related uncertainty may hold back business investment, but this should be partly offset by planned rises in public investment. Fiscal policy could also be further relaxed in the 2017 autumn budget to offset the ongoing real squeeze on household spending power. |
| “There are still downside risks relating to Brexit, but there are also upside possibilities if negotiations go smoothly and the recent eurozone economic recovery continues. We expect the UK to suffer a moderate slowdown, not a recession, but businesses should be monitoring this and making contingency plans.” | “There are still downside risks relating to Brexit, but there are also upside possibilities if negotiations go smoothly and the recent eurozone economic recovery continues. We expect the UK to suffer a moderate slowdown, not a recession, but businesses should be monitoring this and making contingency plans.” |
| Like most forecasters, PwC was surprised by the resilience of the economy in the six months after the EU referendum in June 2016. Growth rates of 0.6% in the third quarter of 2016 and 0.7% in the fourth quarter meant expansion was stronger in the second half of the year than in the first half. | Like most forecasters, PwC was surprised by the resilience of the economy in the six months after the EU referendum in June 2016. Growth rates of 0.6% in the third quarter of 2016 and 0.7% in the fourth quarter meant expansion was stronger in the second half of the year than in the first half. |
| But the consultancy firm said the economy had slowed markedly in the first half of 2017 and pointed to a sharp reduction in housing transactions as evidence of the blow to purchasing power caused by the decline in the value of the pound since the referendum. | But the consultancy firm said the economy had slowed markedly in the first half of 2017 and pointed to a sharp reduction in housing transactions as evidence of the blow to purchasing power caused by the decline in the value of the pound since the referendum. |
| PwC said it expected house price inflation to fall from 7% in 2016 to 3.7% this year, with the previous property hot spot, London, receiving most of the backwash from the Brexit result. | PwC said it expected house price inflation to fall from 7% in 2016 to 3.7% this year, with the previous property hot spot, London, receiving most of the backwash from the Brexit result. |
| The London property market had been hit most by economic and policy uncertainty and the recent changes to stamp duty, the consultancy said. House price inflation in the capital in the first four months of 2017 was about 4% compared with about 13% in the same period last year. PwC said the city’s housing market would continue to slow, with house prices likely to rise on average by 2.8% this year and by 3.8% in 2018. | The London property market had been hit most by economic and policy uncertainty and the recent changes to stamp duty, the consultancy said. House price inflation in the capital in the first four months of 2017 was about 4% compared with about 13% in the same period last year. PwC said the city’s housing market would continue to slow, with house prices likely to rise on average by 2.8% this year and by 3.8% in 2018. |
| Economic growth (GDP) | |
| Economics | |
| PricewaterhouseCoopers | |
| Financial sector | |
| Brexit | |
| news | |
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