Date: 21 November 2016

The Autumn Statement: steady-as-she-goes

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the forthcoming Autumn Statement (23 November):

  • There will be some 'resetting' of fiscal policy, but given the current state of the public finances, it will be modest. The objective of the 'balanced' budget by FY2019 has been dropped.
  • The OBR is expected to downgrade its GDP growth forecasts, possibly to about 1.3% for 2017 (2.2% for the March Budget) and to about 1.5% for 2018 (2.1% in March).
  • Such large GDP downgrades, along with the disappointing outturns for the PSNB so far in FY2016, are likely to have a significant impact on the OBR's projections for the public finances. The IFS projections give a fair idea of the 'direction of travel'. The IFS estimate that there will be a cumulative worsening in borrowing between FY2016 and FY2019 (inclusive) of around £62bn, compared with the OBR's March forecasts.
  • Policy announcements are expected to include increased infrastructure spending, measures to improve productivity, and measures to help the Just About Managing (JAMs), including (possibly) a freeze on fuel duty and further progress on raising personal allowances and the 40p tax threshold.

Other developments include:
  • UK data suggest continued economic resilience. October's retail sales were especially strong.
  • Despite Donald Trump's surprise victory in the US presidential elections, the Fed is still expected to raise rates at its December meeting.
  • Eurostat confirmed that the Eurozone grew by just 0.3% (QOQ) in 2016Q3, to be 1.6% higher (YOY). The German economy grew by a disappointing 0.2% (QOQ).
  • The European Commission's latest economic forecast included a downgrade for Eurozone GDP growth for 2017 to 1.5% (from 1.8% in May).
Ruth Lea said, 'there will be keen interest in the OBR's GDP forecasts for this week's Autumn Statement. Though it is expected there will be sizeable downgrades, and the projections for the public finances will look worse than in March, it should be noted the economy could continue to out-perform 'consensus expectations'. Forecasts are, after all, just forecasts. Otherwise, we are likely to see a 'steady-as-she-goes' Autumn Statement, which is surely appropriate given the resilience of the economy.' For full story: http://www.arbuthnotgroup.com/economic_perspectives_group.html

Press enquiries:

Arbuthnot Banking Group PLC:

Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482
ruthlea@arbuthnot.co.uk
Follow Ruth on Twitter @RuthLeaEcon

David Marshall, Director of Communications
020 7012 2432, 07502 285 835
davidmarshall@arbuthnot.co.uk

Bell Pottinger:
Dan de Belder
020 3772 2561
ddebelder@bellpottinger.com

Arbuthnot Banking Group plc published this content on 21 November 2016 and is solely responsible for the information contained herein.
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