Enjoy the weather this week - we can think about economic forecasts later
City Comment: There’s a summer to enjoy
he sun is shining, the rosé is in the fridge and the summer holidays are in view. It is one of most optimistic times of the year — barring the brief annual spurt of hope on 1 January.
So it seems entirely appropriate that the week should start with two relatively upbeat forecasts - from the CBI and KPMG — predicting that Britain will avoid a recession this year.
A flurry of economic events over the next fortnight — labour market figures, April GDP data and the Fed rates decision this week, and inflation and the Bank of England’s next move on borrowing costs later in the month — will go a long way to settling whether they are right or not. Some more gloomy soothsayers still fear that rising mortgage rates compounding an already painful cost of living crisis could still tip Britain into recession later in the year.
We will probably not know who is right until we get the GDP data for the fourth quarter well into 2024. Either way growth will be feeble at best this year: nobody is disputing that In the meantime there are some cautious reasons for hope, particularly for London where the peak summer tourist season is getting into its stride.
The biggest shadow hanging over this more benign interpretation remains mortgage bills. Today the average two-year fixed deal ticked up again to 5.86%. That will mean enormous pain for hundreds of thousands of homeowners.
Whether the economy can ride that out and, as the CBI predicts, just avoid recession remains to be seen. But for now there’s a summer to enjoy.