Gimber’s view is that such a rate of decline in the trend rate of growth limits the BoE’s options when it comes to any future stimulus, as the level of growth that can be achieved without causing inflation is low.
Konstantinos Venetis, senior economist at TS Lombard, says the UK’s economic resilience has largely been a function of a “virtuous circle” between businesses and consumers, with the former able to pay higher wages because consumers were willing to pay higher prices.
But he says more recent economic data points to a breaking down of this, with the average number of hours worked in the economy now below pre-pandemic levels.
This would be expected to lead to a drop in wage growth, and to sharply lower inflation.
He says the BoE, in its most recent commentary on rates, played down the significance of recent wage data, signalling that other data sets indicated labour market conditions are weakening, and for this reason did not raise interest rates at its most recent meeting.
Some signs emerging from the US point to that economy achieving a soft landing with lower inflation and no recession.
If such an outcome can happen in the UK over the course of the coming year, it will have a major impact on the lives of advisers and their clients, potentially for many years to come.
David Thorpe is special projects editor at FTAdviser