UK economic recovery will be slower than expected; Pandemic fears weigh on the euro a job

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Good morning, and welcome to our renewed coverage of the global economy, financial markets, the eurozone, and business.

Britain’s economy will grow this year and next at a slower rate than previously hoped, as ongoing supply chain disruptions and rising prices dampen growth.

So this morning the EY Item Club warned, as it anticipates that the “hardest” part of the recovery will fall upon us.

In her fall outlook, she warned that “higher and more sustainable inflation,” recent rises in energy prices, and intensifying supply chain disruption mean the recovery will not be as strong as hoped for.

EY now sees UK GDP rise 6.9% this year, down from 7.6% expected in the summer [but still the best year since 1941, after last year’s near-10% plunge]

But growth in 2022 is also seen lower – at 5.6%, down from the 6.5% previously projected.

By 2023, growth returns to 2.3%, before tapering back to a weak 1.8% in 2024 and 2025.

Martin Beck, Chief Economic Adviser to EY ITEM Club says:

“With support from reopening the economy now largely running out, the UK has always been expected to enter a more difficult phase of recovery.

Record growth is still expected, but headwinds continue to run into the end of the year: pandemic-related policy support is being withdrawn, supply chain disruptions and shortages have been more severe than anticipated, and the catch-up room has been greater than expected. been running.

With households under inflation pressures, EY cut its forecast for consumer spending this year from 4.8% to 3.9% growth, and next year to 6.8% from 7.4%.

Beck warns that household income will not keep pace with rising prices:

Although inflation appears to be peaking higher – and staying higher for longer – than initially anticipated, this does not appear to be heading towards ‘stagflation’, which is a combination of slow growth and persistently high inflation.

The inflationary landscape is likely to contribute to lower real household income at the end of the year, slowing the recovery in consumer spending and slowing down the strong recovery we saw earlier in 2021.

But there are still reasons for optimism, as EY is seeing a smaller increase in unemployment than expected, due to the success of the vacation scheme.

The unemployment rate is now expected to peak at 4.6% early next year, up from 4.3% last quarter. Back in July, EY forecast that the post-holiday unemployment rate would rise to a peak of 5.1% in the second half of this year.

Beck explains:

“Despite these challenges, the UK economy has made some significant progress in recovering losses linked to the pandemic and the recovery is far from off the beaten path. Looking at the big picture, the economy has recovered much faster than expected at the beginning of this year.

There are still clear reasons for economic optimism. Although not every household has been able to save more over the past year or so, the accumulation of household savings means that consumers are generally in a good position. Meanwhile, the job market is healthy and companies have built strong balance sheets. The long-term economic scars from the pandemic are likely to be minimal.”

LiveSquawk

Britain’s economy will grow ‘slower than expectations’, finds EY Item Club – Times https://t.co/pxPopziZky

November 22 2021

But… epidemic risks in Europe have not increased, as Austria wakes up to its fourth national lockdown.

Austria’s 20-day partial lockdown is the toughest in Western Europe in months, as Vienna made vaccination mandatory for everyone from February, leading to protests over the weekend:

Travel stocks came under pressure, falling on Friday after the announcement of Austria’s shutdown, as investors fear Europe’s recovery could be hurt by new restrictions this winter.

Jean Charles Gand (@jeancharlesgand)

European airline stocks are feeling the heat of the re-emergence of the pandemic, lagging their global peers. The measure of carriers in Europe, Middle East and Africa has declined for 10 consecutive sessions, representing a decrease of approximately 15%. pic.twitter.com/kPZNg4iYTH

November 22 2021

Analysts at MUFG Bank say:

Market participants are becoming more wary of downside risks to growth in Europe.

The recent wave of COVID has prompted policymakers to re-tighten restrictions. It joins the energy price shock, geopolitical tensions with Russia and the developing currency crisis in Turkey on the list of European investors’ concerns.

In contrast, the US economy regained its upward momentum and the Fed’s communications became more hawkish.

Agenda 11 am GMT: Bundesbank monthly report 1.30 pm GMT: Chicago Fed National Activity Index October 3 GMT: Flash estimate of Eurozone consumer confidence at 3 pm GMT: Existing US home sales for the month of october
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