In October, Britain’s Chancellor of the Exchequer Rishi Sunak announced plans to increase spending for infrastructure, education and to help British citizens with the rising cost of living.
And, at a Dec. 14 International Monetary Fund press conference, Sunak remained firm (www.gov.uk):
We must stick to the Government’s existing public spending plans.
The affordability of this increase in spending, amounting to tens of billions of pounds, is at least partly based on an optimistic economic growth forecast.
However, Elliott Wave International’s December Global Market Perspective presents a different perspective with these charts and commentary:
In our view, Sunak has based his public policy initiatives on … wayward official forecasts. On October 27, the Office for Budget Responsibility (OBR) revised its forecast for economic growth upward from 4% to 6.5%. The OBR forecasts uninterrupted economic growth from now until at least 2026, as the left-hand graph shows. The right-hand graph illustrates the OBR’s rosy forecast for public borrowing. After skyrocketing to 15% of GDP in 2020, the OBR expects this metric to fall every year from now until 2026.
According to Bloomberg, “Sunak’s firepower was boosted by a significantly improved outlook for the British economy.” (10/27/21) We say, not so fast: Negative mood will soon replace his ammunition with blanks.