UK Economy Slows Down Amid Rising Inflation Risks

The United Kingdom's economy is experiencing a slowdown as inflation risks build up. According to Deutsche Bank economists Sanjay Raja and Maui Brennan, the UK enters autumn as the fastest-growing G7 economy due to strong ICT and AI-related investment and improving productivity.

However, they expect second-half growth to slow down as temporary supports from the hot summer and World Cup fade. Higher energy prices will also bite, squeezing real disposable incomes.

The economists predict that growth momentum will moderate, with the UK unlikely to maintain an annualised growth pace of ~2% into H2. Inflation has hit its nadir, and emerging pressures are poised to see CPI rise well above the Bank's target in the coming quarters.