DGB Business: UK GDP Revised Up To 2%

Good news for the UK economy was announced by the Bank of England on Thursday, as they revised UK GDP growth forecasts for 2017 to 2%. If you’re one for keeping track of such things, you’ll know that this is yet another economic forecast that has been proved wrong. Again, the UK has performed better than the forecasts have predicted.

What is striking about this one however is the scale of the revision upwards. I read on Thursday that this is actually one of the largest, if not largest revision to a forecast in the BoE’s history.

Question is, did the bank get it badly wrong, or is the UK economy performing miles better than they had expected. Perhaps a bit of both.

Cheap credit to the rescue

I watched some of Mark Carney’s (the Bank of England Governor) answers to reporters questions after his statement on Thursday lunch time, and he was explaining how he believed that the Bank’s early measure after the Brexit vote to keep credit facilities running was a key factor to the UK performing better than they thought it might. Handy to take credit for that, if it’s your own measure.

He believes that by doing so, people have had continued access to the cheapest credit in UK history, with base rate interest rates still at only 0.25%. This, along with home owners dipping into savings has boosted an already strong consumer spending phase.

There is of course some truth in this. For big ticket items like window and door purchases, home owners often turn to credit in order to afford the renovations, choosing to pay the bill off during a number of years at a certain amount per month. However I do sense that there is also a hangover from the financial crisis, where many people had to tighten their belts for so long, putting off vital works at home. Those people are now at the point of absolutely having to get their windows and doors done, regardless of the domestic outlook right now.

The BoE did stipulate however that a portion of this better than expected economy was being funded by savings money. They said that should inflation rise beyond manageable levels, that spending may slow. The next issue for home owners will then be to look after the pennies and top up those savings that were spent. If inflation rises slower than expected, this may not happen.

Good for glazing

So why is this good for the glazing industry? Confidence breeds confidence, especially in business. A confident consumer is a good one for big ticket item industries like windows and doors. Brexit turned out not to be the end of the UK as predicted, which has likely given the public renewed vigor. A confidence that if we beat the predictions before, things will be fine as we move forward.

With the mortgage rate fairly slow, interest rates next to nothing, and a typical British will to prove wrong those who have doubted us, it is the home improvement market that may well benefit the most, as Brits look to style up their homes.

Generally for our industry, this massively revised GDP forecast should be good news. 2% growth is the same rate of growth in 2016. Impressive considering the political jolts we’ve had in such a short space of time. Our biggest issue to handle in the coming year will be managing the cost of our materials. Inflation is creeping up, and Sterling remains in the $1.25 range. So long as we can limit the size of the cost increases to the home owner, the outlook looks fairly positive for the industry this year.

We should remain focused on our tasks ahead though. 2% GDP growth when compared to 0.8% back last August is obviously good news. But risks remain, and we should position our businesses as strongly as possible should things turn south.