Simply Wealth July 2021
The International Monetary Fund
(IMF) has sharply increased this year’s
growth forecast for the UK, although
recent data does suggest the country’s
strong economic rebound has begun to
slow down.
In its latest assessment of global
economic prospects, the IMF highlighted
a worrying divergence in fortunes
between rich and poor nations, due
to differing access to COVID vaccines.
Growth across all wealthy countries
in 2021 is now predicted to be half a
percentage point stronger than the IMF’s
previous forecast published in April,
but a similar-sized downgrade for other
nations means the overall global growth
forecast remains unchanged at 6%.
For the UK, the international soothsayer
is now predicting growth of 7% in
2021 which, together with the US, is the
joint-fastest rate among the G7 major
advanced economies. This represents
a sizeable upgrade from the previous
forecast, which the IMF attributed to
faster growth between February and
April, when the success of the vaccination
rollout and furlough scheme meant
that the UK economy performed better
than had been expected.
More recent data, however, does
suggest UK growth has slowed across
the past few months. The latest gross
domestic product figures released by the
Office for National Statistics (ONS), for
instance, showed the economy expanded
by 0.8% in May. While this was the fourth
successive month of growth, the figure
was significantly lower than April’s 2%
rate and below market expectations.
Furthermore, survey data suggests
the country’s economic rebound slowed
again last month, with the IHS Markit/
CIPS flash composite Purchasing Managers’
Index (PMI) dropping to 57.7 in
July from 62.2 in June. While any value
over 50 does still represent an acceleration
in output, the latest reading was the
lowest since March and suggests the
rising wave of coronavirus infections and
resulting ‘pingdemic’ has started to stifle
business activity.
