Blog: August 2020
The CPIH measure of inflation has increased to 1.1% and now the gap between the lockdown measure CPILW of 1.2% is small. The use of pre-pandemic expenditure weights is no longer leading to an under-estimate of inflation.
Inflation is set to increase as the pandemic raises costs in many parts of the economy. This is unlikely to happen in 2020 as demand will remain low as unemployment and bankruptcies increase in the coming months.
The Coronavirus pandemic has cast a dark cloud over UK economic prospects for the 2020s. The latest NIESR forecast suggests that GDP will not return to its 2019 level until 2023 or 2024. The Bank of England is more optimistic about the potential for the UK economy to bounce back but it is still not expecting the 2019 level of GDP to be exceeded until 2022. The Office for Budget Responsibility (OBR) central scenario is for a recovery somewhere between the NIESR and Bank projections.