Will the Clouds Clear for the Economy?

This year's EY ITEM Club Summer Forecast demonstrates that economists are being confronted by an extremely dynamic economy with wide variations in performance and outlook. Despite a bounce-back in retail sales and continued job creation, EY ITEM Club now expects the UK economy to grow at 1.4% in 2018, down from its forecast of 1.6% in the spring. 

Key points include:

• Recent months have seen a drumbeat of bad headlines about the struggling UK high street. But strong retail growth in April and May show signs of green shoots.
• EY ITEM Club now expects inflation to climb over the summer before heading down again later in the year.
• The report maintains a downbeat view of prospective growth in consumer spending, which is expected to run at only 1.3 percent this year, before picking up to 1.5 percent in 2019.
• Growing global protectionism, with early summer seeing a welter of tariffs imposed or threatened between the US and some of its major trading partners, could make a cloudy global outlook positively stormy.