The Confederation of British Industry (CBI) raised its forecasts for UK economic growth and said it expects business investment and trade to aid the recovery starting next year.
The business lobby sees the economy expanding 1.4 percent this year and 2.4 percent next year, it said in a quarterly report yesterday. That is up from 1.2 percent and 2.3 percent projected in August. The London-based group also said that unemployment — which the Bank of England has set as the key indicator for its guidance on policy — will fall to 7.2 percent by the end of 2015 from its current 7.7 percent.
“The recovery won’t be spectacular, just slow and steady, but appears more solid and better-rooted,” CBI director-general John Cridland said. “We’re also expecting business investment to pick up over the next two years and beyond, and net trade will begin to make a stronger contribution to growth.”
UK economic growth accelerated to its fastest pace in more than three years in the third quarter as the recovery continued across all main industries. Bank of England (BOE) Governor Mark Carney will present new quarterly forecasts on Nov. 13 and some economists say officials may bring forward their projection for when unemployment will reach a 7 percent threshold.
Carney has said he plans to keep the BOE’s benchmark interest rate at a record low at least until joblessness falls to that level, which the central bank does not see happening until late 2016.
“Our forecast is for the unemployment rate to fall back only gradually, as hours worked increase and productivity begins to recover,” the CBI said. “Our central expectation is that interest rates will remain on hold out to the end of 2015.”
GDP growth will slow to 0.5 percent in the current quarter after expansion of 0.8 percent in the three months through September partly due to the “volatility of trade and investment data,” the CBI said.
Annual growth will accelerate to 2.6 percent in 2015 as household disposable income and business and housing investment increase, it said.