Highlights

Print this page
Email Icon

Email to a colleague

UK GDP growth is projected in our main scenario to slow from 3% in 2007 to only around 1.75% in 2008 and around 1.25% in 2009.
Consumer spending growth is expected to slow more markedly to only around 0.5% in 2009 due to the severe squeeze on consumer spending from high debt levels, tighter credit conditions, falling housing wealth and sharply increasing household energy, petrol and food bills.
Separate analysis in this report shows that the poorest households will be hit most severely by higher energy and food price inflation.
Business investment growth is also expected to moderate significantly in the face of uncertainties relating to the global credit crunch, while public spending growth is planned to be much more subdued than in recent years.
Slower global growth is likely to dampen exports, although this will be offset by the weaker pound. Import growth is expected to slow, so enabling net exports to make a modest positive contribution to overall GDP growth in 2008-9, but this will be far too small to offset the consumer-led slowdown in domestic demand growth.
Risks around growth in our main scenario are significant and have become increasingly weighted to the downside in the recent months. The chance of a recession has now risen to our 30% in our judgement, although this is still not the most likely scenario.
In our main scenario, inflation is likely to rise further in the short term but then fall back towards target during 2009, but there are still considerable uncertainties around this relating to the path of global commodity prices.
Interest rates are assumed to remain on hold for the rest of 2008, but then be cut during the first half of 2009 in our main scenario in response to slower growth and falling headline inflation next year. But interest rate increases cannot be ruled out if inflation accelerates further later this year, particularly if inflationary expectations rise as well.
This issue includes an update of our earlier research looking at the outlook for global carbon emissions to 2050. We now expect these to more than double by the middle of the century in a ‘business as usual’ scenario, with potentially severe adverse implications for climate change and the welfare of future generations.
To avoid this outcome a wide range of measures are required to boost energy efficiency, switch to low carbon fuels, introduce carbon capture and storage at power stations and large industrial plants, and reverse deforestation. This should be both technologically feasible and economically affordable if an appropriate international policy framework is put in place to put a global price on carbon, but it remains to be seen if the political will exists to meet this challenge.

Publications Search Page

Search Publications

Contacts

John Hawksworth
+44 (0) 20 7213 1650

Related Services

PwC Economics

Find out more

Bookmark with:

© 2008 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.