changes year on year unless otherwise stated
We predict reasonably
low GDP growth and a small increase in house prices without this
being reflected by a big increase in inflation. Interest rates may
well remain at 0.5% throughout the year but this depends on the
result of the general election (the closer the result, the less
the public spending cuts and the higher, but later, the interest
rate increases). We expect volatility to increase in the second
half of the year across a number of indicators, with the eventual
direction of the economy emerging in early 2011. We think it is
finely balanced between a long slump and a return to long term growth.
This depends on the delicate balance of when public sector spending
is cut. Too soon and too heavty or left too long and not enough
will result in the slump.