New foundations for growth already look shaky
Over at new blog Shifting Grounds Duncan has a really excellent summary of the implications of the latest OBR forecasts. The striking feature is that while they expect GDP growth to be much the same as they forecast in November, they now expect the contribution to growth from business investment to be much lower. (And the National Institute thinks they may be too optimistic for 2012 – but too pessimistic for 2013.)
Instead, the OBR now expects household consumption to be responsible for a majority of growth until 2016. Indeed, the OBR has revised its forecast growth in household consumption for this year from 0.2 to 0.5 per cent. This is despite the fact that they
expect real household disposable income growth to be subdued in both 2012 and 2013.
It has been revised upwards “mainly due to the effects of payment protection insurance (PPI) fee repayments”!
Household spending may take a while to lift off if today’s Nationwide Consumer Confidence Index figures are anything to go by.
The Nationwide report that the Index fell three points in February, with a four point fall in the sub-index for how people expect the economy to be in six months’ time. Robert Gardner, Nationwide’s Chief Economist, said
Given the uncertain economic outlook, it is no surprise that consumers remain cautious about making major purchases, with nearly half of all respondents thinking it is a bad time to make a major purchase.
And today’s figures from the British Bankers’ Association suggest people are still more interested in paying off debt than tamking on more. Oh well, perhaps another consumer scandal will come along and compo will ride to the rescue!