UK_GDP_2017The story of 2017 seems to be as follows: Post Brexit falls in sterling led to falling real wages, hitting consumption. Brexit related uncertainty led to modest investment. As a result, growth in GDP was modest. By the end of the year, the falls in sterling were beginning to have a positive effect on exports, boosting manufacturing.

In 2018, the one-off effect of falls in sterling will work their way out of the system, helping real wages. Exports will rise, at last benefiting from the falls in the pound. However, the oil price has risen sharply in recent weeks, if this continues, inflation will receive another knock and real wages will continue to fall.

For the UK, 2018 should be better than 2017, but not by much. Meanwhile, the US and euro area are nicely poised for robust expansion.