08/04/2013 UK Economic Briefing PAGE 1 OF 4 UK Monthly Economic Review April 2013 (Based on March 2013 data releases) Monthly headlines: OBR slashes over optimistic GDP forec ast and says Budget 2013 unlikely to impact g rowth UK may avoid a new technical recession, but the risks are finely balanced Latest BCC QES and some external data paints a relatively upbeat picture for Q1 + OBR confirms a weaker economic outlook... The Office for Budget Responsibility (OBR) have once again downgraded their outlook for the UK economy. The OBR halved its GDP forecast for 2013 to 0.6%, and this is now identical to our own growth forecast (see table 1). The OBR also confirmed that the job of restoring stability to the public finances will take longer than they had predicted in December. Public sector debt as a percentage of GDP will now only start declining in 2017/18 (see chart 1). Table1: Latest BCC and OBR GDP forecasts BCC (%) OBR (%) Difference (%) 2013 0.6 0.6 0.0 2014 1.7 1.8 -0.1 2015 2.2 2.3 -0.1 ...and says Budget unlikely to impact growth Last month’s Budget did produce some headline- grabbing measures designed to boost growth in key areas of the economy, including cutting corporation tax, increased infrastructure spending, and measures to support the housing market. The Chancellor also announced a broader remit for the Bank of England to include sup porting growth. However, as the OBR point out, the Chancellors ‘giveaways’ were offset by his ‘takeaways’ and therefore the Budget is expected to have no impact on economic growth . 68 73 78 83 88 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 % OBR December 2012 OBR March 2013 Chart 1: OBR forecasts of public sector debt as a percentage of GDP -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 0 5 10 15 20 25 30 J a n 1 2 F e b - 1 2 M a r 1 2 A p r - 1 2 M a y 1 2 J u n - 1 2 J u l 1 2 A u g - 1 2 S e p 1 2 O c t - 1 2 N o v 1 2 D e c - 1 2 J a n 1 3 c h a n g e % b a l a n c e QES Services home orders (LHS) QES Services export orders (LHS) ONS Service sector output (RHS) Chart 2: UK services sector UK could avoid a new recession… Recent economic data provides hope that the UK economy grew in Q1 2013. Output from the service sector, which accounts for over three-quarters of UK economic output rose by 0.3% in January (see chart 2), the fastest rate for five months. Retail sales also rose by 2.1% in February. The latest BCC Quarterly Economic Survey (QES) also supports an upbeat picture for growth, with the national domestic and export balances in both manufacturing and services rising in the first quarter (see charts 2 and 3). Sources: BCC, OBR Source: OBR Source: BCC, ONS