City economists have come to much the same conclusion as the IMF about the UK’s growth prospects. Every month, the Treasury publishes a round up of independent forecasts for the economy, many of which are banks and other City organisations. In today’s 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.
It isn’t just the average forecasts for GDP that have been shifting. This month’s average forecasts for inflation are a little better than last month’s, but the trend has been for these to deteriorate as well:
This pessimism about inflation is supported by Eurostat figures, out today, which show that the UK’s CPI inflation 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.