Recovery loses its vigour in 2015

The National Accounts released at the end of last year suggested that the economic recovery has less momentum than previously thought and still looks very unbalanced. Real GDP in 2015 is now on course to have expanded by only 2.2% or so – a fairly significant slowdown from the 2.9% growth seen in 2014. And Q3’s 0.4% quarterly rise in GDP was driven by domestic demand. It is hard to see growth this year doing much better than last given the headwinds from the fiscal squeeze and EU referendum. But with consumers’ incomes still buoyed by lower energy prices, we don’t think that a further slowdown is likely either. We expect growth this year of around 2.2% again, but think that a rebound in productivity growth could drive a pick-up in 2017 to around 2.7%.