What’s in store for the economy in 2012?

The New Year sees a wide divergence of views as to where the economy is heading this year. That is, if the forecasts from the 40 or so institutions collated by the Treasury are anything to go by.

Bare growth is expected in 2012 with a median (midpoint) forecast of 0.4% growth for the economy as measured by gross domestic product (GDP). The range of recent forecasts runs from an optimistic 1.7% growth down to an overly pessimistic contraction of 1.3% in GDP.

Inflation, as measured by the Retail Prices Index (RPI), is expected to be running at 2.8% in the fourth quarter of the year, with the range of forecast running from 3.7% at the highest end, down to 0.8% at the lowest.

Earnings, on average, look set to continue to lose pace with the cost of living as the median forecast for 2012 is 2.4% growth. At the top end of the range of forecasts with a 4.1% forecast there might some real growth in earnings; the bottom of the range is for just a 0.9% rise.

www.hm-treasury.gov.uk/d/201201forcomp.pdf