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The latest set of official statistics and survey evidence suggests that activity remained subdued in the first half of this year, with the optimism apparent in post-election business and consumer sentiment proving to be ephemeral. However it is not unusual for there to be some delay before movements in survey responses are reflected in measured expenditure. On balance it does appear as if output has begun to stabilise and we expect a modest recovery over the second half of this year, although it is difficult to be confident about the pace at which the recovery will proceed. Any potential recovery is unlikely to prove sufficient to prevent a further year-on year fall in the level of GDP and the aftermath of the recession, in the form of rising unemployment, repossessions and business failures, can be expected to persist into 1993.
The forecast draws on the work of the whole team engaged in macroeconomic analysis at the Institute. I am grateful to Andrew Britton, Ray Barrell, Paul Gregg, David Mayes and Garry Young for helpful comments and discussions and to Helen Finnegan for preparing the charts. The forecast was completed on August 6, 1992.
