UK Recovery Will Be Faster than Forecast...

British households have amassed an astonishing £150 billion of cash apparently. They will be ready to return to the restaurants and book a much needed holiday. They may even take a trip to the cinema.

The Bank of England forecasts the economy will expand by 5% this year, it could be higher …

The Bank of England forecasts the economy will expand by 5% this year. Our own GDP(O) models suggest the latest “road map” could mean growth is even higher, at around 6.5%. The recovery in the jobs market will be much faster than expected, especially in the hospitality and leisure sectors.

Asked what sort of recovery the UK could expect, Andrew Bailey said "I am now more positive but with a large dose of caution". "We now see upside risks to our January forecast", with some chance the peak in unemployment, may be lower than expected.

In January, the Bank were forecasting growth of 5% for the current year. An upward revision seems probable. 6% to 6.5% growth, seems possible this year. In the US and China, the revisions have already been made. The Federal Reserve has increased growth forecasts for the USA from 4.2% to 6.5%. In China, growth of over 8% is expected. The IMF forecast of 5.5% world growth this year is already out of date.

Surprise Drop in UK Unemployment…

In February, there was a surprise drop in the UK unemployment rate to 5% from 5.1% prior month. Average Weekly learning increased by 4.8%. Finance and Business Services earnings increased by 7.6%.

According to the latest PMI® IHS Markit/CIPS data, business activity across the UK increased in March. The rate of expansion was the fastest for months, The expansion was fuelled by a rise in new orders, attributed to a rebound in sales ahead of easing lockdown measures. Stronger consumer confidence and a surge in demand for residential property services also featured.

The headline seasonally adjusted Composite Output Index registered 56.6 in March, up sharply from 49.6 in February and above the crucial 50.0 no-change mark.

Chris Williamson, Chief Business Economist at IHS Markit, said: “The UK economy rebounded from two months of decline in March, with business activity growing at its fastest rate since last August. Children returned to schools, businesses prepared for the reopening of the economy and the vaccine roll-out boosted confidence.

Companies reported an influx of new orders, on a scale exceeded only once, in almost four years. Business expectations for growth, surged to the highest since comparable data were first available in 2012. Employment rose for the first time since the pandemic struck, as firms expanded capacity to meet demand.

In the US Treasury Secretary Janet Yellen thinks the economy could reach full employment next year. 77% of Americans are now worried about inflation. Some economists fear the Fed will have to intervene, raising rates to curb overheating in the economy. For the moment, the Fed is “topping up the punch bowl and handing out the spliffs”.

In the UK, the recovery will be faster than forecast. Soon it may be time to worry about what happens next, after what happens next … but not just yet …

Disclaimer: The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The presentation should not be construed as the giving of investment or general consultancy advice.