The Confederation of British Industry has raised its growth forecast for both 2013 and 2014, but warned that rebalancing away from consumption towards investment and trade is taking longer than expected.
Growth in GDP for 2013 is now predicted to be 1.2 per cent, up from 1.0 per cent in the CBI’s May forecast, based on indications of improved confidence across a broad range of sectors, including services, construction and manufacturing, and on a stronger-than-expected second quarter.
For the coming year, the CBI expects the economy to gather pace, forecasting 2.3 per cent GDP growth, up from 2.0 per cent in May.
The latest forecasts were in-line with other economists’ predictions. The forecasts were based on slowly strengthening household spending in the second half of 2013 and through to 2014 as confidence and incomes improved.
But it did not expect business investment to pick up until next year. It also predicted a rise in exports in 2014, helped by the eurozone’s return to growth, but warned that net trade’s contribution to the economy would stay “muted” because imports would rise.
The CBI agreed with the Bank of England’s assumption that unemployment would fall slowly.
By the end of 2014, it predicted the jobless rate would be 7.5 per cent.
Bank of England governor Mark Carney has promised to hold interest rates at record lows until this rate falls to 7%– expected mid-2016.
However, investors are expecting the first rate rise to start a year earlier.
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