Business industry in UK:
UK GDP growth slowed a little in 2015, but consumer spending growth remains relatively strong, helped by lower oil prices. The global outlook remains mixed with a gradual pick-up in the US and the Eurozone, but a slowdown in China, continued recessions in Russia and Brazil, and increased volatility in financial markets.
We expect UK GDP growth to average just over 2% in 2016.
Consumer spending will be the main driver of UK growth this year, helped by continued low energy and food prices.
London continues to lead the recovery with projected growth of around 3% in 2016 but all other UK regions should also register positive real growth of around 1.4-2.3% per annum this year.
Inflation will remain low this year, but could rise back towards its 2% target by the end of 2017, so the MPC may start to raise interest rates gradually during the course of 2017 and beyond. But this now seems likely to be a very slow process and rates could still be only around 2% in 2020.