WIREDGOV

• The economy will contract very slightly this year, but grow by just over 1 per cent in 2013.
  
• Consumer price inflation will be 2.7 per cent this year and 2 per cent in 2013.
  
• We expect unemployment to continue to stabilise at about 8 per cent.
  
• We expect the cyclically adjusted current budget to be approximately balanced in 2016-17.

The focus on quarterly movements in GDP – particularly given the multitude of special factors that have distorted the statistics this year – detracts from the bigger picture. Over the past two years GDP has been broadly flat, and the economy is still around 3.3 per cent below its pre-recession peak in January 2008. Overall this year we expect no GDP growth. This is a slightly stronger picture than presented in our July forecast, but little different from our January and April forecasts.

The outlook for the international economy has weakened. This has led us to revise our forecast for UK growth next year down slightly. We now expect the economy to expand by 1.1 per cent per annum, with no contribution from net trade, and somewhat faster the following year. Only in 2015 do we expect economic growth to rise above the UK’s potential rate of 2 per cent per annum.

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