Deutsche Bank Cuts U.K. Growth Forecasts as Supply Woes Bite
Deutsche Bank Cuts U.K. Growth Forecasts as Supply Woes Bite
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Deutsche Bank AG unveiled widespread cuts to its outlook for the U.K.’s growth prospects as the nation grapples with supply disruptions and slowing demand.
In a note on Thursday, the bank lowered its predictions for the economy for the last two quarters of this year, as well as 2022 and 2023. It lifted its prediction for 2021 after a report earlier in the day showed growth in the second quarter came in stronger than initially reported.
With the second quarter seeing the economy “expanding by a lot more than expected, we have revised down our Q3 and Q4 projections, to reflect base effects, unfolding supply side restrictions, and slowing demand momentum as indicated by our nowcast models,” Deutsche Bank economist Sanjay Raja wrote in a note Thursday.
The new forecasts are:
| Period | New Forecast | Old Forecast |
|---|---|---|
| 3Q 2021 | 1.8% | 2.3% |
| 4Q 2021 | 0.7% | 1.1% |
| 2021 | 7.1% | 6.7% |
| 2022 | 3.6% | 5% |
| 2021 | 1.5% | 2% |
The pace of Britain’s economic recovery has slowed in recent months after booming in the immediate weeks following a loosening in lockdown rules that started in April. Consumers have turned more cautious as supply-chain disruptions mount. Households are now facing hefty tax increases and higher energy bills, and analysts expect unemployment to rise after the end of the government’s furlough benefit program.
Despite the weaker outlook from this point forward, Deutsche Bank expects the stronger performance in 2021 will strengthen the case for the Bank of England to hike rates in early 2022.
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