The UK GDP growth rate
Source: ONS
2013 has seen two consecutive quarters of positive growth for the first time since 2011. Last year saw ups and downs on a quarterly basis as momentum struggled to build. The first half of 2013 suggests an economic recovery is gathering pace.
The direction of forecasts have changed
Over the last few years the general trend has seen forecasted growth rates progressively downgraded. However, over the last couple of months growing optimism is reflected in lifted figures. The Bank of England recently raised its growth forecast from 1.2pc to 1.4pc and the CBI has lifted its forecast from 1% to 1.2% for this year.
|
Predicted UK GDP Growth Rates |
||
|
|
2013 |
2014 |
|
OECD (September) |
1.5 |
1.5 |
|
B. of E. (August) |
1.4 |
2.5 |
|
PwC (August) |
1.0 |
2.0 |
|
IMF (July) |
0.9 |
1.5 |
|
CBI (August) |
1.2 |
2.3 |
|
Average |
1.20 |
1.96 |
Why the change?
On the domestic front, a strong raft of economic data (retail, manufacturing, services, construction and the housing sectors have all been gathering pace) have upgraded prospects. Reassurance that UK interest rates will remain low for some time to come has added to confidence. Further support also comes from recent figures which showed the Eurozone, The UK’s biggest trading partner, emerging from recession.
The future rate of growth
It is still early days in the recovery process but growth rates for 2014 have also been revised upwards. As observed from the table above, the Bank of England and the CBI are predicting growth rates for 2014 of 2.5pc (previously 1.7pc) and 2.3pc (previously 2pc) respectively.
Is a 2%+ growth rate achievable?
Growth rates of 2pc and above could be viewed as high and may prove challenging to sustain. While 2014 could see a bounce back, without firm economic footing, potential exists for it to lead to weak growth the following year. Taking the view that 2pc growth rates are not achievable unless significant economic reform is undertaken, an annual growth rate of 1pc will be considered good.
Updated: 05/09/2013
Sources:
ONS - Gross Domestic Product Preliminary Estimate, Q2 2013
PwC - Global economy watch | Projections
OECD - Economic Outlook
IMF - World Economic Outlook Update
BBC - Economy Tracker
The Telegraph - Mark Carney Inflation Report
Businessweek - UK growth forecasts raised by CBI as recovery builds momentum