Lockdown is destroying UK GDP while Eurostat inflates the HICP
1) Activity restrictions are lasting longer and doing more damage than widely assumed. We remain at the bottom of the Consensus for UK GDP in 2021.
2) Eurostat is pushing HICP inflation to use 2020 expenditure data for weights, with the probable new mix driving our forecast to the top of the euro area Consensus.
The depression deepens in my bottom-of-consensus forecast.
- Seasonal increases in Covid infections have led the government into ever-tighter activity restrictions. The outlook has deteriorated over the past month to beneath even my already bottom-of-consensus forecast. The long-term damage of lockdown still looks likely to be far higher than most expect.
The UK economy is collateral damage to Covid-control
- Covid infections are set to remain seasonally high until the Spring, despite vaccine progress. Tight restrictions on activity cause another recession in my bottom-of-consensus GDP forecast. I also see the long-term damage of lockdowns as likely to be far higher than widely expected.