PreviousNext

Bank of England ¿will slash growth forecast to zero¿, say analysts

By // Money | Bank of England ¿will slash growth forecast to zero¿, say analysts
Email to a friend Plain text Print version // Font size: Decrease font Enlarge font

By Dan Atkinson

PUBLISHED: 16:08 EST, 4 August 2012 | UPDATED: 02:55 EST, 5 August 2012

The Bank of England will this week join the ranks of forecasters who have cut their outlook for the British economy, with many analysts expecting the Bank to predict zero growth for 2012.

The shock 0.7 per cent collapse of gross domestic product in the second quarter, coming after a 0.3 per cent decline in the first quarter and mounting fears about performance in the current quarter, seem sure to force the Bank to abandon its existing forecasts, published in May.

The Bank then was looking for 0.5 per cent growth this year and 2.1 per cent next year. Now it is thought that the 2012 forecast will be close to no growth, with the 2013 estimate cut back to about 1.6 per cent.

British economy: It is thought that the Bank of England's 2012 forecast will be close to no growth

British economy: It is thought that the Bank of England's 2012 forecast will be close to no growth

Even this figure would be ominous, being below the two per cent annual growth thought necessary to stave off a rise in unemployment.

‘The May figures did not always appear so over-optimistic,’ said Ross Walker, economist at Royal Bank of Scotland. ‘But the Bank seems to have had a tendency over time to assume official growth numbers will always be revised up, and this has not been the case recently.’

The new growth figures will come in the Bank’s quarterly inflation report, to be published on Wednesday.

How does the current slump compare with previous recessions?

The great recession: How does the current slump compare with previous recessions?

Last week, it announced that the nine members of the Monetary Policy Committee would leave the base rate and its quantitative easing money creation programme unchanged – for now.

What next for rates?

The dire GDP figures (25 July), which showed Britain's recession was worsening and had extended from six months to nine months, merely reinforced the gloom and cemented the chances of a rate cut, writes Andrew Oxlade.

Money markets on 3 August implied rates would be cut from 0.50% to 0.25% in December and then rise back to 0.50% in January 2016. A rise to 0.75% is not forecast until October 2017 with an increase to 1% in November 2018.

That's the most dovish forecast made so far in the financial crisis, and it's a significant shift from three months ago when the predictions for a rise to 0.75% was 'mid-2014' .

The market has only recently priced in that rates would fall before rising. Minutes from the Bank of England monetary policy committee have shown for two months that a rate cut was talked about [Read more on the June MPC discussion].

‘The Bank is going to be knocking down its growth estimates for this year and next,’ said Peter Dixon, strategist at Commerzbank.

Howard Archer, economist with independent forecasting group IHS Global Insight, said: ‘The dreadful second-quarter performance has knocked their forecast off course.

‘To be fair to the Bank, no one saw that one coming, with the Jubilee Bank Holiday being so exacerbated by the impact of the weather on construction and retailing.

‘It all leaves the door open for more quantitative easing, and there is a growing likelihood of a cut in the base rate from its current 0.5 per cent.’

There had been hopes of a strong recovery in the third quarter, but now these are starting to fade.

Last week’s survey of purchasing managers in manufacturing industry in July showed the fastest contraction in activity in more than three years, although this was partly balanced by a somewhat brighter version of the same survey covering purchasing managers in the construction industry.

Tagged : No tags for this article

Headlines Newsview all

Daughter meets father for the first time after tracking him down but is then raped by him

A daughter who met her dad for the first time after tracking him down was then raped by him, a court heard. The woman, from Melbourne, ... Full story

Cash-strapped ISIS fighters ditch terror group after being left furious over pay cuts

Islamic State monsters are ditching the evil terror group after being forced to take yet another pay cut, a terror expert has claimed. The ISIS fighters ... Full story

Beyonce slays the Super Bowl! Leather-clad Queen Bey brings new song Formation to the Super Bowl in super slick performance with Coldplay and Bruno Mars

She performed 'Black Lives Matter rallying cry' during half-time  The supporting performers formed an 'X' on the field - thought to reference black rights campaigner Malcolm ... Full story

Battle between Classic FM and BBC Radio 3 continues

BBC Radio 3 accused rival station of being 'put together by a computer' Boss Alan Davey previously denied claim station is turning into Classic FM In a ...

Megyn Kelly jokes she wants to tell Donald Trump: 'Apology Accepted' at GOP

Kelly joked that her first comment to Trump at the next GOP debate would be: 'Apology accepted' She said that Fox didn't have a feud with ...

Peyton Manning’s Super Bowl 2016 dream comes true in Broncos victory over Panthers

Peyton Manning's Denver Broncos won Super Bowl 50 with a 24-10 victory over Cam Newton's Carolina Panthers Star quarterback is expected to retire, but was coy ...

David Wichs killed in New York crane collapse is remembered as an 'angel' at funeral

David Wichs, 38, who was crushed to death after a crane toppled over in high winds, was eulogized as generous  His devastated widow Rebecca Guttman-Wichs said ...

David Cameron plans to free prisoners during the week

Many inmates would be allowed out of jail during the week under new plans The radical scheme, to be revealed by David Cameron, for prisoners near ...

Where fund managers are looking for bargains shares in the storm

Fund and trust managers reveal where they are looking for cheaper shares Fidelity's Alex Wright says Shell is an attractive prospect Lowland investment trust managers buy into ...

Beyonce gets political at Super Bowl 50 with Black Lives Matter-themed performance

Beyonce delivered her message during performance of new single Formation at halftime during Super Bowl 50 Her backing dancers appeared dressed as Black Panthers activists with all-black outfits ...

Hillary Clinton reminds New Hampshire Democrats of their history: 'You lifted me up and gave me back my voice' she said of her 2008 Granite State win

Hillary Clinton and Bernie Sanders spoke at a giant fundraiser tonight for New Hampshire Democrats  Clinton started off her speech reminding the crowd of how the ... Full story

Comment on: Bank of England ¿will slash growth forecast to zero¿, say analysts

Rate this article

0

Breaking News

Citizens’ Advice say care home fees 'rise by £2,000 with a week's notice'

Thousands of pensioners only get week's notice before care fees soar Annual care home fees increased by an average of £900 across England Fees in East of ...

Peyton Manning mentions Budweiser twice in post-Super Bowl 50 game interviews

Peyton Manning mentioned Budweiser twice in post-Super Bowl interviews He said he was going to 'drink a lot of Budweiser tonight' two times But the beer makers ...

Sydney to enjoy a 'perfect' week of weather as Perth swelters through 42C heatwave

Sydney set to enjoy hot and sunny conditions with highs of 32C on Sunday Perth will continue to swelter through heatwave with consecutive 42C days Extreme fire ...

David Cameron claims quitting Europe will lead to Jungle camps in Kent

Prime Minister is to warn migrant camps could arrive if Britain leaves EU In speech he will say camps like the Jungle in Calais could arrive ...

Twitter users make fun of Super Bowl 50 2016 ad about constipation

Twitter users poked fun at the Super Bowl 50 ad about constipation  The opioid-induced constipation ad featured a man envious of other people who weren't constipated   Millions ...

Google, Amazon and Facebook may be forced to reveal revenue and taxes

Companies may be forced to publish revenue and taxes under a new law Draft law by EU would see Google, Facebook and Amazon to reveal figures European ...

Deakin University scientist finds shark nets do NOTHING to prevent attacks

No link between no. of sharks in the water and no. of attacks, study says  Shark nets only reduce the amount of sharks in a patch ...

Carolina Panthers QB Cam Newton storms out of Super Bowl press conference

Cam Newton's Panthers were backed as favorites to win the Super Bowl But Broncos took the lead in the first minutes and never gave it up Newton, ...

Proud to be named the UK's stingiest woman: Visitors must bring their own teabags and heating's for softies - JANE FRYER meets the penny-pincher 

Frugal Ilona Richards, 66,  from Scunthorpe, has a list of money-saving tips Pensioner buys food only at night when stores drop their prices on items She also ...

Super Bowl 2016 viewers slam Peter Carstairs's Doritos ad on Twitter

Hundreds of viewers have slammed Doritos Super Bowl 'Ultrasound' advertIt shows woman going into early labour because unborn child wants crisp Aussie filmmaker Peter Carstairs won ...