Investment Clock insights

Autumn Statement far from UK version of Trumpflation


Ian Kernohan

23 November 2016

GDP growth forecasts were a tad higher than expected, at 1.4% for next year and 1.7% in 2018. However, looking beyond that, the Office for Budget Responsibility growth forecasts look very similar to their March forecast, so there is little sense that they believe Brexit, when it happens, will be a significant headwind to growth.  
The deficit forecasts were close to expectations for the next few years: higher deficits than in the March budget, with a small deficit, rather than a surplus, planned for 2020/21. Once Philip Hammond got past the changes to GDP growth and deficit forecasts however, the speech was actually a bit dull, perhaps deliberately so: lots about the Oxford-Cambridge expressway and a grant to renovate an important stately home.  
The bottom line is that this is still a situation of fiscal consolidation, just a bit less than during the Osborne years. While it does represent a boost to the economy relative to the March plans, this is far from a UK version of Trumpflation.  There is some room, though not a lot, to increase the fiscal stimulus, if the economy slows by more than expected over the next couple of years.

GDP growth forecasts were a tad higher than expected, at 1.4% for next year and 1.7% in 2018. However, looking beyond that, the Office for Budget Responsibility growth forecasts look very similar to their March forecast, so there is little sense that they believe Brexit, when it happens, will be a significant headwind to growth.  

The deficit forecasts were close to expectations for the next few years: higher deficits than in the March budget, with a small deficit, rather than a surplus, planned for 2020/21. Once Philip Hammond got past the changes to GDP growth and deficit forecasts however, the speech was actually a bit dull, perhaps deliberately so: lots about the Oxford-Cambridge expressway and a grant to renovate an important stately home.

The bottom line is that this is still a situation of fiscal consolidation, just a bit less than during the Osborne years. While it does represent a boost to the economy relative to the March plans, this is far from a UK version of Trumpflation. There is some room, though not a lot, to increase the fiscal stimulus, if the economy slows by more than expected over the next couple of years.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.