• One-in-three chance of UK GDP growth being less than one per cent in 2018
  • Inflation risks have fallen considerably for 2018 
  • WBSFS more pessimistic than Bank of England of UK's GDP growth
  • One-in-four chance that low opne per cent growth will persist in 2019

The WBS Forecasting System has revised upwards its forecast of ‘slow’ growth of less than one per cent continuing through 2018. 

By feeding the Office for National Statistics' latest estimate of GDP growth for the first quarter 2018 of growth at 0.1%, the WBS Forecasting System (WBSFS) calculated a pattern of slowing economic growth in the UK. 

The WBSFS now suggests a one-in-three chance of growth at less than one per cent in 2018, up from a one-in-five chance forecast one quarter ago.

And while there is more uncertainty about prospects for 2019, there is now a one-in-four chance of growth of less than one per cent in 2019, up from a one-in-five chance forecast one quarter ago.

Relative to the WBSFS' forecasts made one quarter ago, inflation risks have fallen considerably for 2018. There is now less than a one-in-20 chance that inflation will exceed three per cent in 2018, relative to a two-in-five chance forecast one quarter ago.

There is also now a reduced prospect that inflation persists into 2019, with a one-in-five chance that inflation exceeds three per cent in 2019 relative to the one-in-three chance forecast one quarter ago.

Ana Galvao, Associate Professor of Economic Modelling and Forecasting, said: “Conditioning on the ONS’s latest GDP growth estimates, the WBSFS has revised downwards its forecasts of economic growth such that there is now a one-in-three chance that GDP growth falls below one per cent in 2018 relative to the one-in-five chance forecast one quarter ago.

"While there is now also a higher chance that GDP growth disappoints in 2019, there is much more uncertainty about growth prospects in 2019 than 2018, with a two-in-five chance of growth greater than two per cent in 2019.”

Instead of using a single forecasting model or relying on the judgement of the Bank of England’s Monetary Policy Committee the WBSFS combines five state-of-the-art econometric models to produce judgement-free macroeconomic forecasts for UK GDP growth and CPI inflation. These forecasts are updated each quarter to reflect the latest data.

By using model averaging and following well-established methods in statistics, meteorology and economics, the WBSFS takes a weighted combination of each models’ forecasts, where higher weights are awarded to models that show the better recent forecasting performance. The WBSFS quantifies and communicates the forecast uncertainties by producing probabilistic forecasts. 

James Mitchell, Professor of Economic Modelling and Forecasting added: “The Bank of England, NIESR and the HMT Panel of Independent Forecasters are all more optimistic than the WBSFS about GDP growth prospects in 2018. But looking further ahead to 2019, we see more agreement that economic growth will most likely fall in the one to two per cent range.”

Anthony Garratt, Professor of Economic Modelling and Forecasting, said “Relative to our forecasts made one quarter ago, inflation risks have fallen considerably for 2018.

"There is now less than a one-in-20 chance that inflation exceeds three per cent in 2018, relative to the two-in-five chance forecast one quarter ago. There is also a reduced prospect that inflation persists into 2019, with a one-in-five chance that inflation exceeds three per cent in 2019 relative to the one-in-three chance forecast one quarter ago.”

For more on the WBSFS visit its website.

Professor James Mitchell teaches Managing in a New World on the Full-time MBA and Economics of the Business Environment? on the Executive MBA and Executive MBA (London). 

Professor Anthony Garratt teaches Economics in the Global Environment on the MSc Management course and on the Executive MBA and Empirical Applications in Macro, Financial and Energy Economics? on the MSc Finance.

Professor Ana Galvao teaches Economics for Management and Business and Forecasting for Decision Makers on the MSc Management course.