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 teamTRANSCRIPT
The Saturday Economist.com
Ten Predictions for 2014
with Professor Milton Keynes
Saturday, 11 January 14
-20
-15
-10
-5
0
5
10
15
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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World Trade Growth
The Saturday Economist.com
World Trade
Forecast
Data Source
World trade growth is expected to recover from an average 2.8% in 2013 to a trendrate of growth of around 5% over the next two years.
Saturday, 11 January 14
The Saturday Economist.com UK Growth
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0
1.0
2.0
3.0
4.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2.72.52.0
0.3
1.21.6
-5.5
-0.6
3.6
2.6
3.6
GDP
Predictions for 2014
UK GDP growth for 2013 will berevised up to 2% in the year.
We expect growth of 2.5% in 2014rising to 2.7% in the following year.
Saturday, 11 January 14
The Saturday Economist.com Inflation CPI
0
1.0
2.0
3.0
4.0
5.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2.42.32.6
2.8
4.5
3.3
2.2
3.6
2.42.32.0
Inflation CPI
Predictions for 2014
Inflation CPI basis will end the year 2013around 2.1% in the final quarter of the year.
We expect inflation to average 2.3% in 2014rising to 2.4% in the following year.
Saturday, 11 January 14
The Saturday Economist.com Unemployment
0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1,062.0
1,193.0
1,424.0
1,585.01,533.0
1,497.11,529.1
906.0863.3
944.7
862.1
Claimant Count
Predictions for 2014
We expect the strong growth in the labourmarket to continuewith claimant count falling to 1.2 million (avg)a rate of 3.8% in 2014.
In the following year, theclaimant count could fall below 1 million by the endof the final quarter pushingthe unemployment rate to 3.3%.
3.3%3.8%4.5%5.1%5.0%4.9%5.0%3.0%2.9%3.2%2.9%
Saturday, 11 January 14
The Saturday Economist.com Unemployment
0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
2,3392,4072,4872,5482,564
2,4762,390
1,7831,6541,674
1,467
LFS Rate 000
Predictions for 2014
The unemployment rateLFS basis is expected to average 7.4% in 2014, falling to 7.1% in 2015compared to 7.7% in 2013.
The level of unemployment LFS basis will average 2.4 million in 2015 and just over 2.3 million in 2015.
In this basis we see no need for the MPC to adjust the Forward Guidance parameters in the short term.
7.1%7.4%4.9% 5.5% 5.4% 5.7% 7.6% 7.9% 8.1% 7.9% 7.7%
Saturday, 11 January 14
The Saturday Economist.com Average Earnings
0
1.0
2.0
3.0
4.0
5.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
3.2
2.5
1.41.5
2.4
1.7
1.1
3.6
4.94.74.6
Average Earnings
Predictions for 2014
The strength in the labour market, particularly the short claimant count measure, will lead to a significant surgein pay settlements and earnings in 2014.
We expect earnings to increase by 2.5% in 2014 rising to 3.2% in 2015.
Saturday, 11 January 14
Imports - trade in goods we model at trend rate of3% over the next fifteen months
Exports we model as a function of world trade and relative price changes
The Saturday Economist
Trade in Goods
The Saturday Economist .comwith Professor Milton Keynes ...........
The residual deficit represents the structural and trend deterioration in the trade in goods deficit.
Saturday, 11 January 14
The Saturday Economist.com Balance of Payments
-140,000
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
2005 2007 2009 2011 2013 2015
Trade in Goods
Predictions for 2014
We expect the structural deficit, trade in goodsto continue, offset by the trade in services surplus.
The overall impact, goods and services deficit represents an overall deficit around -2% of GDP.
0
20,000
40,000
60,000
80,000
2005 2007 2009 2011 2013 2015
Trade in Services
-50,000
-40,000
-30,000
-20,000
-10,000
0
2005 2007 2009 2011 2013 2015
Trade in Goods & Services
Saturday, 11 January 14
The Saturday Economist.com Government £
0
50,000
100,000
150,000
200,000
2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16
70,000
88,000
102,500114,934117,968
139,421
157,293
99,355
37,951
Government Borrowing £m
Predictions for 2014
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.
The government is on track to eliminate the deficit within five years assuming the trend rate of growth of GDP can be maintained.
OBR
3.9%2.7% 7.0% 11.2% 9.3% 7.6% 7.3% 6.2% 5.1%
Saturday, 11 January 14
The Saturday Economist.com Sterling
1.00
1.20
1.40
1.60
1.80
2.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
1.46 1.47 1.46
1.26
1.121.17 1.15
1.231.18
1.241.29
1.82 1.84
2.00
1.85
1.57 1.551.60 1.59 1.56
1.651.72
Dollar Euro
Predictions for 2014
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.
Data sets represent annual averages
Saturday, 11 January 14
The Saturday Economist.com Gilt Rates
0
1.0
2.0
3.0
4.0
5.0
6.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
4.5
3.3
2.5
1.9
3.1
3.63.6
4.6
5.0
4.54.4
Gilt Yields
Predictions for 2014
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 anormalised 4.5% by the end of the forecastperiod.
Saturday, 11 January 14
The Saturday Economist.com Base Rates
0
1.0
2.0
3.0
4.0
5.0
6.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
0.80.50.50.50.50.50.6
4.7
5.5
4.64.6
Base Rates
Predictions for 2014
Base rates averaged 4.8% in the four yearsprior to recession.
The period of low base rates is expected tocontinue for the year 2014 with a rise in ratesexpected from the middle of 2015.
We think base rates could end the year 2015at 1.0%, thereafter rising significantly to fair value 4.5% within two years.
Saturday, 11 January 14
The Saturday Economist.com
Ten Predictions for 2014
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.
Saturday, 11 January 14