Morgan Stanley takes a hatchet to UK growth forecasts

Only Italy has lagged UK growth in the past year among major economies but the outlook continues to sour.

Morgan Stanley has cut is 2012 estimate to -0.5% from +0.5% and its 2013 forecast to +1.0% from +1.8%.

They cite four factors:

A deterioration in external outlook, a risk of further muddling through in the eurozone, worse than expected GDP growth in the first half of 2012 and higher borrowing costs and continued weak credit growth in prospect.

Morgan Stanley is now below the consensus for 2012 (0%) and 2013 (1.55%).

The Bank of England forecasts of +0.56% this year and +2.11% have drifted away from reality but the biggest outlier is Goldman Sachs. They are forecasting +2.3% UK growth next year — I would like to hear the reasoning behind that one.