Britain’s economic outlook is a bit rosier. Instead of falling into a recession this year, as it was predicting in April, the IMF now believes the country will eke out growth. But inflation figures are less encouraging
reckons that Britain no longer looks like the sick man of Europe. The fund’s growth forecast of 0.4% for 2023 is hardly the stuff of champagne and cartwheels, but it is still better than the slight contraction it predicts for Germany. The fund thinks that Britain will also do better than France and Italy over the next few years.
In fact, there was little—if any—good news in the figures. The drop in the headline rate largely reflected “base effects”. Energy prices jumped in April 2022 as a cap on retail prices was adjusted to reflect higher wholesale prices following the start of the war in Ukraine. This April’s fall in the year-on-year comparison reflects a more favourable starting-point.
Most concerning for the Bank of England, so-called core inflation, which strips out food and energy to give a less volatile picture of underlying inflationary pressure, rose to 6.8% in April, up from 6.2% in March. That means the core-inflation rate is at its highest level since 1992. A similar rise occurred in the rate of services inflation, a decent indicator of the domestically generated inflation that the bank has the greatest power to affect.
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