The UK is heading for a light recession, warns consultancy

Capital Economics, the Metropolis consultancy, are sticking with their forecast that the UK is heading for a light recession later this yr.

Ruth Gregory, their deputy chief UK economist, informed purchasers that the 0.5% rise in GDP in June was largely because of the return to the conventional variety of working days in June after Might’s financial institution vacation for the King’s Coronation.

Thus, it makes the economic system look stronger than it truly is.

Gregory added: “General, the financial institution vacation, unusually heat climate and strikes make it onerous to guage the true well being of the economic system. However our sense is that underlying exercise remains to be rising, albeit at a snail’s tempo. We nonetheless assume that with many of the drag from increased rates of interest nonetheless to return, GDP will fall in Q3 and a gentle recession will start.

“That won’t stop the Financial institution from elevating rates of interest from 5.25% now to five.50% in September. However it might imply that charges don’t rise so far as the 5.75-6.00% envisaged by the consensus and buyers.”