THE ECONOMY will recover more quickly than previously expected as lower inflation helps households and as the services sector continues to pick up, the British Chambers of Commerce (BCC) forecast today.
And business confidence is at its highest level in three years, boosting growth hopes further according to an study out yesterday from Lloyds.
The BCC now expects the economy to grow by 0.9 per cent this year, well up from the previous prediction of 0.6 per cent. Its 2014 growth forecast has been upgraded from 1.7 per cent to 1.9 per cent, and its 2015 outlook from 2.2 per cent to 2.4 per cent.
“The outlook will gradually get better. GDP and consumer spending may regain their pre-recession levels in the second half of 2014, rather than 2015 as previously thought,” said BCC economist David Kern.
Yet the road may not be smooth. “The two main risks facing our forecast are worsening Eurozone prospects and an upturn in UK inflation which would squeeze real incomes and could harm growth.”
The BCC is urging incoming Bank of England governor Mark Carney not to print any more money, arguing that pushing down sterling further would simply import inflation.
Kern fears the harm that would cause to consumers and businesses far outweighs any small gain from increased exports. And the BCC wants George Osborne to cut more red tape to allow the construction sector to growth once more.
Meanwhile Lloyds Bank’s business barometer surged in May.
The number of firms which are positive about the UK’s economy outweighed those who are negative by a margin of 57 per cent – well up on April’s 44 per cent and the highest score in three years. And a net balance of 39 per cent feel positive about Britain’s future rose from 27 per cent in April to 39 per cent in May.
Analysts believe this suggests growth of 0.3 per cent in the second quarter.
“Lower price inflation, rising equity markets and firmer economic activity in the first quarter of the year seems to have buoyed business confidence in the general economy last month,” said Lloyds’ Trevor Williams.
Meanwhile GfK’s consumer confidence index rose to minus 22, its joint highest level since 2011, indicating some improvement in sentiment.