UK GDP will turn positive, inching up 0.1 per cent between October and the end of the year, the forecasting group predicts. This will be driven by a revival in consumer spending, up one per cent in the third quarter and 0.9 per cent in the fourth, says Item. It sees GDP down 0.2 per cent over the year as a whole, but predicts that in 2013 GDP will grow by 1.2 per cent with house prices rising 2.3 per cent.
“With exports being battered by the Eurozone crisis and a weakening economic outlook in markets such as the US, India and China, the UK is relying heavily on the high street to come to the rescue this year,” said Peter Spencer at Item.
Though Spencer thought falling inflation and stable employment would allow a high street rescue to take place, he warned that a return to consumption was, “not the balanced long term sustainable growth we were hoping for”.
But even with a return to growth, chancellor George Osborne will not meet his deficit reduction targets, the group expects.
Using the Treasury’s own economic model, Item calculates that the government will overshoot and need to borrow around £8bn more than originally planned.