In recent weeks, uncertainty surrounding the economic outlook has intensified due to the sovereign debt crisis in Europe and the US, which has led to fears in the financial markets. In contrast, the UK is in a slightly better position but continues to face its own challenges. In the short-term, economic growth continues to be very sluggish with the National Institute of Economic and Social Research’s (NIESR) latest estimate of 2Q11 economic growth of just 0.1%, compared with 0.5% in 4Q10, indicating a definite slowdown in the momentum of growth. For 2011, we continue to expect a moderate recovery for the UK economy where GDP is forecast to grow by 1.1% in 2011 and 2.1% in 2012. Furthermore, the manufacturing sector PMI contracted in July to 49.1, while the service sector indicator increased to 55.4.
Source : UBS AG