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UK economic growth and inflation comments from Aberdeen Standard Investments’ Head of Research

Richard Dunbar, Head of Research at Aberdeen Standard Investments, comments on UK economic growth in the coming months and inflation figures.

On economic growth:

“Given the vaccine success in the UK, we expect the UK to grow faster than the United States, and at twice the rate of the European Union, but do bear in mind that we underperformed all comers last year. There’s a lot of growth already starting and it’s looking pretty good, relative to virtually any other large economy globally.

“We had a screech of brakes on the UK economy last year, as we ground to zero miles an hour. Now, with the vaccine rollout and the stimulus to both the UK economy and the global economy, we’ve put a foot heavily on the accelerator,  so it’s a very unusual set of circumstances.

“There’s also a lot of global growth around, driven by the US and, indeed, the UK. There’s an expectation that the rising tide will lift a lot of boats, including some of the emerging market economies.”

On inflation in the UK:

“Manufacturing had done much better last year than many had expected and that’s now accelerating further and the service sector is going from nothing to full speed ahead. With leisure, tourism and hospitality, it’s all systems go.

“So, we’re seeing this massive readjustment of the UK economy from goods to services in the space of a few weeks. It’s sort of uncomfortable at the moment and the question is, will that discomfort persist, in terms of wages and lack of supply of labour?”

On inflation in the US:

“The expectation this week is that it heads up towards 5%… 4.7% to 5% is the range of expectations.

“The Federal Reserve’s target for inflation in the US is 2%, so it’s miles above where they should be, but the expectation of the Federal Reserve, and of the Bank of England, is that this will be transitory and will flow through in due course.

“Hopefully, there will be an increase in training to boost the supply of labour and furlough schemes will end and further increase the labour supply. But there is a strong counter argument that fuels inflationary debate.”

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