3.1% Wage Increase
The Consumer Price Index (CPI) measure of inflation moved to 0.3% in January 2016 up from 0.20% in December 2015. Although food and fuel prices fell in January they did so by less than the same month in 2015 pushing the inflation rate higher.
The Retail Price Index measure (RPI) rose to 1.3% in January up from 1.2% in December 2015.
Interest rates remain firm at 0.5% with commentators largely pushing out their expectation for rises to the end of 2016.
The Construction Products Association (CPA) revised down its forecast for 2016 by 0.2% to 3.6%. However, its forecasts for 2017 onwards have all been revised upwards to 4.1% in 2017 and 4.2% in 2018.
Private housing is forecast to see steady growth of 5% per annum over the next two years, contrasting limited growth in public housing.
Commercial office output remains strong with 7% increases in both 2016 and 2017, but has a weaker pipeline in 2018.
Infrastructure remains the solid sector underpinning demand with over 10% growth this year and 15% projected in 2017.
Brexit - Unexplored Territory
The referendum for the UK to remain or stay in the European Union is dividing opinions and creating uncertainty.
The impact of leaving is not clear and it is difficult to predict the outcome. Uncertainty will prevail in the short-term and could cause a pause to economic growth, mirroring the effect of the Scottish referendum, with businesses “waiting and seeing” rather than pressing on with investment decisions.
The upside is business as usual or better, the downside could be an economic crash.
New Forecast to 2020
Our long term forecast to 2020 is included at the statistical average rate of 3.5%per annum for a normal growth market.