Will Empty Shelves Damage Growth ...
No Chicken in Nando's, No Chips at Nissan, No shakes at MacDonald's. Empty shelves are increasing. The head of the Co-Op said food shortages were the worst he has ever known.
Evidently not a war baby, CEO Steve Murrells announced the group was reducing some ranges. The ability to get food into stores was hit by post Brexit migration rules and Covid challenges.
A lack of fruit pickers, food processors and lorry drivers to blame for part of the crisis, businesses are pleading for a relaxation of rules on visas and an acceleration of test and training for new drivers to ease supply problems.
This week, once again, the car industry reported production difficulties. Output fell by 37% last month. It was the worst July performance since 1956. Manufactures "grappled" with the global shortage of semi conductors. TSMC, the Taiwan Semi Conductor Manufacturer moved to ease the supply crisis by hiking prices 20%.
Will empty shelves damage growth? Not according to the latest "Forecasts for the UK Economy" published by HM Treasury. The average forecast for GDP growth in 2021 remains at 6.9%. The more expansive forecasts have been tailed back.
JP Morgan is now forecasting growth of 7.1%. Capital Economics expects growth of 6.7%. Goldman Sachs is even more nervous about prospects for the UK. The American Bank is forecasting growth of 7.1%. Our Saturday Economist central forecast, we may lower perhaps to 7.0% on the next data release in September. We still expect growth of over 5.0% in 2022, slowing to perhaps 3.5% in the following year, thereafter reverting to trend growth of around 2% in the years to follow.
Over the next five years, the economy will grow by over 20% in real terms and by over 30% in nominal terms. The additional revenues to the Treasury will be almost £250 billion in the period. The latest borrowing figures suggest the total borrowing this year could fall below £175 billion. In March the Office For Budget Responsibility was expecting borrowing to hit £234 billion.
Inflation fears are increasing. CPI inflation is expected to average over 3% in the final quarter compared to just over 2.5% expected last month. The July 2% CPI level reported is dismissed as an anomaly.
Our Labour Market Chart Book has an update on the latest data. Analysis of wage trends suggests rates of increases will fall towards 3% by the end of the year. We await with interest the end of the furlough scheme. I.6 million unemployed, 1.9 million on furlough and 1 million vacancies in the economy will make for an interesting unwind towards the end of the year ...
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