UK Outlook – September 2024
Improved short term outlook, longer term challenges remain
We have revised up our GDP forecast for this year to 1.1%, from 0.7% previously, on foot of the robust rebound in activity in the first half of the year. Our forecasts for 2025 and 2026 are unchanged at 1.4% and 1.6%, broadly in line with the UK’s potential growth rate. In relation to the labour market we are forecasting broadly unchanged employment this year, with jobs growth picking up to 0.6% in 2025 and 0.8% in 2026. We have pulled down our unemployment projections slightly, to 4.2% this year and 4.4% in 2025 and 2026. Inflation and wage growth are continuing to ease. We expect core inflation to drop to the BoE’s 2% target by the end of 2025. Monetary easing is set to continue, supporting demand amidst an ongoing fiscal adjustment – we expect the BoE to cut the policy rate to 3.50% by the end of next year.
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