We need a Plan B

City economists have come to much the same conclusion as the IMF about the UK’s growth prospects, says the TUC’s Richard Exell on the Touchstone blog.

Every month, the Treasury publishes a round up of independent forecasts for the economy, many of which are banks and other City organisations. In its latest comparison, the average for new forecasts (that is, those published in the past month) puts UK GDP growth at 1.1% in 2011. This is the same as the revised IMF forecast; the City average forecast for 2012 is 1.7%, slightly higher than the IMF’s 1.6%. None of the forecasters expect growth to be higher than 1.8% in 2011.

These forecasts have been repeatedly revised downwards throughout the year, and the average forecast for 2011 is now more than a third off the average forecast twelve months ago.

There is also pessimism about inflation, supported by recently published Eurostat figures, which show that the UK’s consumer inflation (CPI) is very high by international standards. In August, the average annual inflation rate in the EU was 2.9% — in the UK, it was 4.5%. The only EU member states with higher rates were Estonia and Latvia.

Stagnant growth and high inflation — it isn’t surprising that even City economists are rapidly downscaling their expectations of this government.

http://touchstoneblog.org.uk/2011/09/city-losing-faith-in-plan-a/