“Economy set to weather the downturn over the remainder of the year” says Yael Selfin, Chief Economist at KPMG UK.
“Despite continued difficulties, the UK economy is expected to keep its head its above water. Weakening economic conditions will remain a feature over the near term, with a large part of the impact from tighter monetary policy still to come. Around 1.5 million fixed-rate mortgages are set to expire next year, which will put pressure on consumer spending.
“The manufacturing sector is bearing the brunt from both higher interest rates and the slowdown in trade, with forward-looking indicators pointing to further difficulties for the sector in the months ahead. Despite activity in the services sector remaining more resilient, output in the hospitality sector has been fragile due to elevated cost pressures and staff constraints, while weak business confidence could see business to business activity remaining sluggish.
“Despite the headwinds, we expect the UK economy to escape a recession, with a relatively strong labour market underpinning household incomes and preventing a significant correction in the housing market. The Bank of England will be reluctant to provide support until it sees inflation returning sustainably to target in the medium term but will likely keep interest rates on hold tomorrow.”
