What to Expect In Q1 Of 2017

Prediction are never easy, but let us try and understand what the first quarter of 2017 may look like – as the UK consistently builds their expectations on its economic front. Key implications will be due to the Brexit.

Housing

One of the expected events is that the housing market will boom consistently. This is because the housing market has been synonymous with bond investors and this relationship is set to improve. A survey on the UK housing market by the Bank of England has released findings that support this.

Interest rates

Another expectation is a hike in interest rates. The Bank of England may hike interest rates. This hike will be a measure to counter inflation and also to stimulate growth. The hike will be good news for savers. However the implication on other sectors will be that loans and mortgages will be hard to repay. Even so, the housing market will not be one of the reasons for this hike.

Equity markets

As far as Brexit is concerned, we expect volatile equity markets and the weakening of the sterling pound.  All year round the indices have experienced a rollercoaster. The weakest performing indices prior to the Brexit vote showed an impressive performance after the vote. The exchange rates are also likely to fall.

The weakening of the sterling will result in a rise in the consumer price inflation, and it will rise above the monetary policy committees target before further dissipation of the exchange rate.

Consumer spending

Uncertainty will continue to curtail on consumer spending and will continue to dampen investments. Uncertainty has never been a good thing for business. Companies will hold back on hiring and making long-term investments. Consumers will also postpone large spending decisions as seen by economic analyst Madhavi Bokil. Even so, the fall of the sterling will in the short term have a boost to the export industry.

Other expectations

Bank of England also forecast that investment and employment would likely be flat due to the referendum. The Organization for Economic Cooperation and Development (OECD) projected a rise in GDP by 1.8% in 2016 but it has projected that growth will fall to 1% in 2017. It has also forecasted that globalization will grind to a halt due to slumps in trade. It has also warned that the low annual growth rate could surmount to lower productivity, wages and lower investment. It posits that lost trade is a major risk and that it contributes to uncertainty about the future path of policies and economic reaction

As regards spillovers, they are currently moderate in the global economy but will likely have a negative connotation in the first quarter of 2017.

Pensions are likely also to take a fall, specifically state pensions. This is because the Bank of England could employ quantitative easing which lowers yields of bonds and annuity rates. Thus, take-outs for pension annuities will experience less income for the principal amount 

The above outlooks denote uncertainty in the first quarter of 2017. Even so, the UK has the necessary tools to support the economy. We should remain aware of the fact that there are difficult times coming.

The first quarter of 2017 is clouded with a lot of uncertainty. Thus, the UK has to brace itself with the necessary tools to support the economy – do you have any tricks to ride the upcoming waves?

Share This: