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UK predicted to return back to growth

UK predicted to return back to growth

Category: Economy

Updated: 08/05/2012
First Published: 03/05/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK is currently in recession, but an influential group has predicted that the country will return to growth in the second half of this year.

The CBI is predicting that the economy will grow by 0.6% from July to December, although this is slightly down from its forecast of 0.9% that it made in February.

Despite this, growth prospects remain broadly unchanged for the latter half of the year and, in 2013, it expects the UK to benefit from a more sustained recovery.

Quarter-on-quarter growth is expected to be flat in the second quarter of 2012 (0%), affected by the impact of the additional bank holiday for the Diamond Jubilee.

However, there will be an improvement in the second half of the year (0.7%, 0.5%), reflecting an improving global economy and an expected easing in inflationary pressures, plus a slight boost from the Olympics and a bounce back from the second quarter.

While inflation is expected to be somewhat higher than previously thought throughout 2012, in part due to recent oil price rises, it should continue on a downward trend and come close to hitting the Bank of England's 2.0% target in the spring of 2013.

It is hoped that a fall in inflation will alleviate some of the squeeze on household incomes and boost business confidence.

"Despite the disappointing GDP estimate for the first quarter from the ONS, we still think the UK economy will grow in 2012, with faster growth next year," said John Cridland, Head of CBI.

"Optimism among businesses has been increasing since the turn of the year, with manufacturing demand holding up. And that is beginning to translate into more jobs and investment."

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