Investment to boost economy as firms spend

Tim Wallace
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ECONOMIC growth numbers are expected to be upgraded this week, and increasing business investment is set to boost GDP across the rest of 2015.

The first estimate of first quarter growth came in surprisingly low at 0.3 per cent.

But economists expect this to be revised up to 0.4 per cent on Thursday – and for the higher number to foreshadow much stronger growth through the rest of the year.

In particular, business investment has been muted so far in the recovery, with firms burned by the financial crisis persistently reluctant to splash out on new equipment, particularly when hiring workers has offered a cheaper and more flexible option. But as unemployment dives and the recovery becomes entrenched, they are likely to spend more.

“Now that the risk of prolonged political uncertainty and instability has seemingly disappeared, business investment should improve as the fundamentals look sound; these include improved margins (helped by very low oil and commodity prices), decent profitability, companies’ generally healthy cash positions, tax breaks, low interest rates and easier lending conditions,” said Howard Archer, chief economist at IHS Global Insight.

Export growth should also start to recover as the Eurozone economies continue to pick up after a prolonged rough patch.