BCC News: Quarterly Economic Forecast for Q4 2022
The British Chambers of Commerce (BCC) have published Quarterly Economic Forecast for Q4 2022.
BCC forecasts the economy will not return to growth until Q4 2023. UK inflation is expected to be 11.0% in Q4 2022 and to slow to 5% by Q4 2023. The economy will grow in 2024 but the recovery will be weak as business investment, exports and household consumption all remain subdued.
GDP heading for a five-quarter contraction
In the immediate term, the BCC is now forecasting a five-quarter recession for the UK economy which began in Q3 of 2022. The annual expectation for GDP growth in 2023 is now -1.3%, broadly in line with the OBR and Bank of England’s predictions.
A key contributor to the 2023 economic contraction is a sharp fall in household spending as consumers face rising energy costs, falling real wages, frozenincome tax allowances and higher mortgage payments.
Inflation likely to have peaked at 11%
Businesses and consumers will continue to face high costs due to inflation, but the upward spiral is now thought to have peaked for Q4 2022. This is down from the previous BCC prediction of 14.0%, thanks in part to the Government’s energy price guarantee. The CPI rate is expected to slow to 5.0% in Q4 2023 and finally drop below the Bank of England’s target to 1.5% in Q4 2024.
Investment and recovery expected to be anaemic
Overall investment is expected to fall by 1.8% in 2023, with business investment expected to fall even further by 3.0% in 2023, down significantly from a previous prediction of a 0.6% increase. This follows recent BCC research showing significant falls in business confidence in recent months. Household consumption is also expected to fall by 2.3% although Government spending is expected to increase by 4.6%.
Key areas covered in the forecast:
- UK GDP growth
- Household consumption
- Business investment
- Export and import growth
- UK unemployment rate
- CPI inflation
- UK official interest rates