Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Cost of living squeeze will take toll on economic bounce-back - forecast

Cost of living squeeze will take toll on economic bounce-back - forecast

The EY ITEM Club has pushed back the date when the economy is expected to return to pre-pandemic levels to the start of next year.

Britain's cost of living squeeze will take its toll on the economy's recovery according to a new forecast which downgrades the GDP outlook for this year and next.

The EY ITEM Club, which uses the Treasury model for the UK economy, now expects Britain to grow by 6.9% in 2021 - down from a previously forecast 7.6%.

That would still be the strongest pace of growth since 1941 but it follows a pandemic-hit 2020 when GDP shrank by nearly 10% in its worst year for nearly a century.

The forecast now predicts UK GDP to reach its pre-pandemic size in the first quarter of next year, rather than by the end of this year.

It said the downgrade was the result of higher and more sustained inflation - partly caused by soaring energy prices - as well as supply chain disruption.

The spike in inflation, which recently hit a decade-high 4.2% and is expected to reach 5% in coming months, would probably mean household incomes falling in real terms over coming months, the forecast suggested.

That would mean incomes, even if growing, failing to keep pace with the increase in prices, squeezing households' purchasing power.

The report said that this would crimp growth in consumer spending - to 3.9% from a previously predicted 4.8% - and result in the strong economic rebound seen earlier in 2021 decelerating.

Also taking its toll on the economy is a supply chain crisis caused by a lack of workers in sectors such as haulage and meat processing as well global shipping delays and product shortages that are hurting industries from car production to construction.

A shortage of HGV drivers is among the factors behind the supply chain crisis


It comes at a time when government support for the economy in the shape of the furlough scheme has been withdrawn.

Growth for 2022 has been downgraded from 6.5% to 5.6%.

On a positive note, the forecast notes that the jobs market has done better than expected and now suggests unemployment as peaking at 4.6% rather than the 5.1% outlook previously seen following the end of furlough.

A build-up of £170bn of savings by households during lockdowns as well as hopes that inflation pressures prove temporary also give cause for hope, according to the report.

Martin Beck, chief economic adviser to the EY ITEM Club, said: "With the boost from reopening the economy now largely passed, the UK was always expected to enter a tougher phase of the recovery.

"Record growth is still forecast, but there are persistent headwinds as we approach the end of the year: pandemic-related policy support is being withdrawn, supply chain disruption and shortages have been more severe than expected, and the scope for catch-up growth has been run down.

"Despite these challenges, the UK economy has made some significant progress in regaining pandemic-related losses and the recovery is far from out of steam."

The forecast comes after latest official figures showed weak consumer spending and supply chain problems took their toll on the economy in the third quarter, with GDP growth slowing sharply to 1.3%.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Elon Musk Unveils Grokipedia: An AI-Driven Alternative to Wikipedia
Russia’s President Putin Declares Burevestnik Nuclear Cruise Missile Ready for Deployment
US Administration Under President Donald Trump Reportedly Lifts Ban on Ukraine’s Use of Storm Shadow Missiles Against Russia
White House Announces No Imminent Summit Between Trump and Putin
China Presses Netherlands to “properly” Resolve the Nexperia Seizure as Supply Chain Risks Grow
Merz Attacks Migrants, Sparks Uproar, and Refuses to Apologize: “Ask Your Daughters”
Apple Challenges EU Digital Markets Act Crackdown in Landmark Court Battle
Shouting Match at the White House: 'Trump Cursed, Threw Maps, and Told Zelensky – "Putin Will Destroy You"'
‘No Kings’ Protests Inflate Numbers — But History Shows Nations Collapse Without Strong Executive Power
"The Tsunami Is Coming, and It’s Massive": The World’s Richest Man Unveils a New AI Vision
EU Moves to Use Frozen Russian Assets to Buy U.S. Weapons for Ukraine
Europe Emerges as the Biggest Casualty in U.S.-China Rare Earth Rivalry
“Firepower” Promised for Ukraine as NATO Ministers Meet — But U.S. Tomahawks Remain Undecided
The Sydney Sweeney and Jeans Storm: “The Outcome Surpassed Our Wildest Dreams”
Dutch Government Seizes Chipmaker After U.S. Presses for Removal of Chinese CEO
AI and Cybersecurity at Forefront as GITEX Global 2025 Kicks Off in Dubai
Ex-Microsoft Engineer Confirms Famous Windows XP Key Was Leaked Corporate License, Not a Hack
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
×