EY ITEM Club Winter Forecast

2022 has been quite the year, from a global energy price shock, political turmoil and a rising cost-of-living crisis, each factor has contributed to the most widely anticipated recession in the UK in living memory. As the new year progresses, the EY ITEM Club expects more of the same, with early signs of the economy shrinking over the first half of the year. Despite the early gloom, there could still be light at the end of the tunnel.

Key takeaways include:

• Consumer spending fell 1.1% in Q3 2022 and with high inflation, rising interest rates, tax increases and falling household incomes, consumer spending is expected to continue fallling into the New Year. 
• GDP is forecast to shrink 0.7% this year, versus a fall of 0.3% predicted three months ago. But declining inflation, real household incomes returning to growth and the possibility of a fall in energy bills from the summer mean the economy is forecast to start growing again from Q3 2023.