The saturday economist ten predictions for 2014

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The Saturday Economist, ten predictions for the UK economy in 2014. The outlook for the UK economy explained, forecasts from the Professor and his team

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The saturday economist ten predictions for 2014

  1. 1. The Saturday Economist.com with Professor Milton Keynes Ten Predictions for 2014 Saturday, 11 January 14
  2. 2. World Trade World Trade Growth 20 15 10 Forecast 5 0 -5 -10 -15 -20 Data Source World trade growth is expected to recover from an average 2.8% in 2013 to a trend rate of growth of around 5% over the next two years. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 The Saturday Economist.com Check out www.johnashcroft.co.uk, Join me on LinkedIn, Twitter or Google+ Saturday, 11 January 14
  3. 3. The Saturday Economist.com UK Growth GDP UK GDP growth for 2013 will be revised up to 2% in the year. 4.0 3.0 We expect growth of 2.5% in 2014 rising to 2.7% in the following year. 3.6 3.6 2.6 2.5 2.0 1.6 1.0 2.7 2.0 1.2 0.3 0 -1.0 -0.6 -2.0 -3.0 -4.0 -5.0 -6.0 -5.5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Predictions for 2014 Saturday, 11 January 14
  4. 4. The Saturday Economist.com Inflation CPI basis will end the year 2013 around 2.1% in the final quarter of the year. We expect inflation to average 2.3% in 2014 rising to 2.4% in the following year. Inflation CPI Inflation CPI 5.0 4.5 4.0 3.6 3.3 3.0 2.8 2.3 2.0 2.0 2.4 2.2 2.6 2.3 2.4 1.0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Predictions for 2014 Saturday, 11 January 14
  5. 5. The Saturday Economist.com Unemployment Claimant Count We expect the strong growth in the labour market to continue with claimant count falling to 1.2 million (avg) a rate of 3.8% in 2014. In the following year, the claimant count could fall below 1 million by the end of the final quarter pushing the unemployment rate to 3.3%. 1,600.0 1,529.1 1,497.1 1,533.0 1,585.0 1,424.0 1,400.0 1,193.0 1,200.0 1,062.0 1,000.0 944.7 863.3 862.1 906.0 800.0 600.0 400.0 2.9% 3.2% 2.9% 3.0% 5.0% 4.9% 5.0% 5.1% 4.5% 3.8% 3.3% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 200.0 0 Predictions for 2014 Saturday, 11 January 14
  6. 6. The Saturday Economist.com LFS Rate 000 The unemployment rate LFS basis is expected to 3,000.0 average 7.4% in 2014, falling to 7.1% in 2015 compared to 7.7% in 2013. 2,500.0 The level of unemployment LFS basis will average 2.4 million in 2015 and just over 2.3 million in 2015. 2,390 2,000.0 1,674 1,654 1,500.0 Unemployment 2,476 2,564 2,548 2,487 2,407 2,339 1,783 1,467 1,000.0 In this basis we see no need for the MPC to adjust the Forward Guidance parameters in the short term. 4.9% 5.5% 5.4% 5.7% 7.6% 7.9% 8.1% 7.9% 7.7% 7.4% 7.1% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 500.0 0 Predictions for 2014 Saturday, 11 January 14
  7. 7. The Saturday Economist.com Average Earnings Average Earnings The strength in the labour market, particularly the short claimant count measure, will lead to a significant surge in pay settlements and earnings in 2014. 5.0 4.0 4.6 4.7 4.9 3.6 3.2 We expect earnings to increase by 2.5% in 2014 rising to 3.2% in 2015. 3.0 2.5 2.4 2.0 1.7 1.5 1.4 1.1 1.0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Predictions for 2014 Saturday, 11 January 14
  8. 8. The Saturday Economist Trade in Goods Imports - trade in goods we model at trend rate of 3% over the next fifteen months Exports we model as a function of world trade and relative price changes The residual deficit represents the structural and trend deterioration in the trade in goods deficit. with Professor Milton Keynes ........... Saturday, 11 January 14 The Saturday Economist .com
  9. 9. The Saturday Economist.com Balance of Payments We expect the structural deficit, trade in goods to continue, offset by the trade in services surplus. The overall impact, goods and services deficit represents an overall deficit around -2% of GDP. Trade in Services 80,000 60,000 40,000 Trade in Goods 20,000 0 0 -20,000 2005 2007 2009 2011 2013 2015 Trade in Goods & Services -40,000 0 -60,000 -10,000 -80,000 -20,000 -100,000 -30,000 -120,000 -40,000 -140,000 -50,000 2005 2007 2009 2011 2013 2015 2005 2007 2009 2011 2013 2015 Predictions for 2014 Saturday, 11 January 14
  10. 10. The Saturday Economist.com We expect the rate of borrowing to fall significantly as the economy recovers. Our bench line forecasts are taken from the office of budget responsibility with slight amends as a result of higher GDP estimates. Government £ Government Borrowing £m 200,000 157,293 150,000 139,421 117,968 114,934 The government is on track to eliminate the deficit within five years assuming the trend rate of growth of GDP can be maintained. 102,500 99,355 100,000 88,000 70,000 50,000 37,951 2.7% 0 7.0% 2007/8 2008/9 11.2% 9.3% 7.6% 7.3% 6.2% 5.1% 3.9% 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 OBR Predictions for 2014 Saturday, 11 January 14
  11. 11. The Saturday Economist.com The recent sterling strength against the dollar and the euro is expected to continue over the next two years. We see the dollar rate challenging the 1.75 level over the period and challenging the 1.28 level against the euro. Sterling Dollar Euro 2.00 2.00 1.85 1.82 1.84 1.80 1.72 1.57 1.55 1.60 1.60 1.59 1.56 1.65 1.46 1.47 1.46 1.40 1.26 1.20 1.23 1.12 1.17 1.15 1.24 1.29 1.18 1.00 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Data sets represent annual averages Predictions for 2014 Saturday, 11 January 14
  12. 12. The Saturday Economist.com Gilt Rates Gilt Yields Ten year gilt yields opened the year 2014 at just over 3%. We expect the yield curve to return to fair value over the next two years with 10 year rates returning to a normalised 4.5% by the end of the forecast period. 6.0 5.0 5.0 4.4 4.0 3.0 2.0 4.5 4.6 4.5 3.6 3.6 3.3 3.1 2.5 1.9 1.0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Predictions for 2014 Saturday, 11 January 14
  13. 13. The Saturday Economist.com Base Rates Base Rates Base rates averaged 4.8% in the four years prior to recession. 6.0 5.0 The period of low base rates is expected to continue for the year 2014 with a rise in rates expected from the middle of 2015. 5.5 4.6 4.6 4.7 4.0 3.0 We think base rates could end the year 2015 at 1.0%, thereafter rising significantly to fair value 4.5% within two years. 2.0 1.0 0 0.6 0.5 0.5 0.5 0.5 0.5 0.8 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Predictions for 2014 Saturday, 11 January 14
  14. 14. The Saturday Economist.com with Professor Milton Keynes © 2014 The Saturday Economist, TheSaturdayEconomist, by John Ashcroft and Company, Dimensions of Strategy and The Apple Case Study. The material is based upon information which we consider to be reliable but we do not represent that it is accurate or complete and it should not be relied upon as such. We accept no liability for errors, or omissions of opinion or fact. In particular, no reliance should be placed on the comments on trends in financial markets. The content within this presentation should not be construed as the giving of investment advice. Ten Predictions for 2014 Saturday, 11 January 14

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