Monetary Policy Report November 2019 Section 2 Current economic conditions 15
2 Current economic conditions Global GDP growth has slowed markedly, partly because of escalating trade protectionism. Several central banks have lowered policy rates, and global financial conditions have loosened a little. Sterling has appreciated by around 4% since August as the risk of a no-deal Brexit has fallen. UK GDP growth has been volatile so far this year. Abstracting from temporary factors, underlying growth has slowed. This reflects the impact of Brexit-related uncertainties and weaker global growth. Business surveys suggest that the near-term outlook remains subdued. The labour market remains tight, and this has caused pay and domestic cost pressures to increase. However, employment growth has weakened recently and the slowing in demand growth has caused a margin of spare capacity to open up. CPI inflation has been close to target in recent months, although lower energy prices and water bills are likely to cause it to fall over the next few quarters. Chart 2.1 UK GDP growth is expected to remain subdued; inflation is expected to fall slightly Near-term projections(a) Percentage change on a quarter earlier
Projection in August
GDP
1.2
2019 Q3(b)
2019 Q4
0.8
0.4
+
0.4%
0.2%
3.8%
3.9%
1.8%
1.4%
0.0 Projection 2013
14
15
16
17
18
– 0.4
19 Per cent
Unemployment rate
5.8 5.2 4.6
Projection
4.0
Projection in August 2015
16
17
18
3.4 0.0
19 Per cent
4 3
Projection 2 Projection in August
CPI inflation
1
+ 0
– 2015
16
17
18
19
1
Sources: ONS and Bank calculations. (a) The lighter diamonds show Bank staff’s projections at the time of the August 2019 Inflation Report. The darker diamonds show current staff projections. The bands on either side of the diamonds show the uncertainty around those projections based on one root mean squared error of projections since 2004. (b) GDP and unemployment projections are based on official data to August. CPI inflation figure is an outturn.