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Q4 UK GDP Figures: Chancellor to rely on more QE in face of flat-lining economy, says KPMG Chief Economist

25 January 2012

Commenting on the 4th quarter UK GDP figures published today, KPMG Chief Economist, Andrew Smith, said:

"Under any other circumstances, confirmation that the economy has essentially flat-lined for over a year and remains some 4 percent below the peak of 2008 would have raised expectations of an expansionary budget in March.

"But while it looks likely that the Chancellor will come under increasing pressure to revisit the deficit reduction plan, he will be unwilling to countenance further changes to fiscal policy after the revisions to borrowing announced only last November.

"With the outlook for demand bleak in the face of public spending cuts, declining real wages, rising unemployment and depressed European export markets, the onus remains on expansionary monetary policy. The latest MPC minutes do nothing to dispel expectations of a further tranche of quantitative easing in coming months."



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