CBI doubles George Osborne's economic growth forecast

Business lobby group cites growing confidence, forecasting UK growth of 1.2% this year and 2.3% in 2014

The CBI has raised its forecast for UK economic growth this year to 1.2% – double the pace predicted by George Osborne in his March budget – as the business lobbying group cited mounting confidence across the British economy.

It becomes the latest organisation to raise its outlook for the UK after a series of surveys and official data have suggested green shoots of recovery are taking hold, prompting the CBI to raise its 2013 growth estimate from 1%. However, the CBI, which has long been a supporter of the government's austerity drive and promises to cut the deficit, sounded a note of caution as it warned that ministers' push for a rebalancing away from consumption is taking longer than expected.

"The economy has started to gain momentum and confidence is picking up, but it's still early days," said John Cridland, the CBI's director general. "We need to see a full-blown rebalancing of our economy, with stronger business investment and trade before we can call a sustainable recovery. We hope that will begin to emerge next year, as the eurozone starts growing again." Government statistics published today show signs of a rebalancing, or at least the impact of austerity measures on public sector jobs, with private sector employment at its highest in 15 years at 24.1 million people.

The CBI said there were "signs of a pick-up in confidence across a broad range of sectors, including services, construction and manufacturing".

For 2014, the group is now pencilling 2.3% growth, up from May's forecast of 2%. Leading thinktank, the National Institute for Economic and Social Research, and forecasters Fathom Consulting both upgraded their outlook for the UK economy earlier this month to 1.2%. That growth is based on a rise in disposable incomes and some support from exports as the eurozone continues to recover following a protracted recession that was finally confirmed over last week.

Official UK data on Friday is expected to add to the tentatively optimistic tone, confirming economic growth accelerated in the second quarter to 0.6%, double the pace in the first three months of this year. That would be unchanged from the number the Office for National Statistics estimated in its first take on GDP for the quarter, which was welcomed by the chancellor as showing the economy has moved "out of intensive care".

A handful of economists believe growth could be revised higher on Friday to 0.7%. Among them, Philip Shaw at Investec, notes that numbers from the construction sector have been revised up since that first estimate on growth and that the performance of the dominant services is also likely to be nudged up.

"Our 2013 GDP forecast is still +1.2%, but we are tempted to upgrade this modestly given the positive data dynamics recorded recently," he added.

But many economists share the CBI's concern that the economy remains overly dependent on consumers, who account for around two-thirds of all spending. They say consumers are not in a strong position to drive a recovery as they grapple with the biggest squeeze on household budgets for decades.

There is fresh evidence of that pressure on Monday. The latest Asda Income Tracker suggests disposable household incomes fell last month as wages failed to keep pace with living costs.

The supermarket chain says the average UK household had £160 a week of disposable income in July, down £1 a week from a year earlier and £5 a week from a peak in February 2010. It blamed energy bills for burning a hole in household budgets after they rose by 8.2% over the past year.

"A 'feel-good' summer has contributed to a boost in retail sales, but we can't ignore the fact that the squeeze on income growth and rising cost of living continue to pull at consumer purse strings," said Asda chief executive Andy Clarke.

But he noted a rise in consumer optimism, nonetheless. That chimes with a separate survey suggesting households spent more in August as they reported that access to unsecured loans improved and they were relatively upbeat about their finances.

Data company Markit, said the measure of financial wellbeing in its Household Finance Index dipped "only slightly" from July's record high. It stood at 40.8 in August, down from 41.5 in July, the highest since the survey was launch in early 2009.

Still, there were contrasting feelings around the country.

"The strains on finances are receding fastest among those in private sector service jobs, while those working in construction, retail and the public sector trail behind. On a regional basis, familiar trends continued in August as people in Scotland and the south of England were the least downbeat about their finances, while those in Wales and the north of England were among the most pessimistic," said Tim Moore, senior economist at Markit.

Growing evidence of a renewed pick-up in house prices has also boosted sentiment among homeowners but at the same time prompted warnings that Britain could be headed for a damaging property boom and bust.

The CBI's director general, John Cridland, said: 'The economy has started to gain momentum and confidence is picking up, but it's still early days.Property website Rightmove is the latest to report rising house price inflation on Monday, adding to a flurry of recent surveys that reignited criticism of government schemes to kickstart the housing market. Average asking prices are up by more than £20,000 so far in 2013 and stood at £249,199 in August, Rightmove said. As is typical for August, that marked a slight dip from July but at 1.8% the holiday season fall was less than in previous years. In annual terms house price inflation accelerated to 5.5% from 4.8% growth in July.

The average asking price for flats hit a record high of £209,652 in August, Rightmove said, as it joined the chorus of warnings over government schemes.

"Flats are most in demand by first-time buyers and buy-to-let investors and we have seen prices for this property type hit their highest ever level as supply fails to keep up with an increase in demand at the bottom of the market," said Rightmove director Miles Shipside.

"Demand is already on the up, and that's before the roll-out of phase two of the Help to Buy stimulus. It is now critical that the supply of property improves so that the goal of a significant increase in transaction numbers is not over-shadowed by an unsustainable boom in property prices."

Article Source : http://www.guardian.co.ukAzure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike and if u want to Setup ur business in United Kingdom then  its not difficult in this modern age for more info visit our site Azure Global and join us also On Facebook

UK GDP: Osborne hails triple-dip escape as sign of 'healing economy'

But Labour and economists insist the figures don't add up to a recovery

George Osborne has hailed news that the UK escaped a triple-diprecession in the first quarter of 2013 as evidence that the coalition's policies are helping to "build an economy fit for the future".

After a challenging week, in which the International Monetary Fund urged him to ease up on his austerity policies, and Fitch became the second agency to strip the UK of its AAA credit rating, the chancellor welcomed the 0.3% growth in GDP announced by the Office for National Statistics (ONS).

"Today's figures are an encouraging sign the economy is healing," he said. "Despite a tough economic backdrop, we are making progress. We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth but, by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."

A second quarter of contraction, after the 0.3% decline in the final three months of 2012, would have met economists' standard definition of a recession, fuelling Labour's argument that the coalition's cutbacks have choked off recovery.

But despite the unexpectedly strong growth figure, the shadow chancellor Ed Balls pointed out that GDP remained at the same level as it had been six months earlier. The ONS said the economy had been "broadly flat" over the past 18 months.

George Osborne welcomed the 0.3% growth figure announced by the ONS: 'Britain is recovering and we are building an economy fit for the future.'

"If we're to have a strong and sustained recovery and catch up all the ground we have lost over the last few years, we need urgent action to kickstart our economy and strengthen it for the long term – as Labour and the IMF have warned," Balls said.

According to the detail of the ONS's figures, the upturn in GDP was driven by growth of 0.6% in the key services sector, which includes retail and transport and makes up more than three quarters of the economy.

Industrial production also expanded, by 0.2% – though much of that was accounted for by rising North Sea oil and gas production. Activity in the hard-hit construction sector declined by 2.5%.

The business secretary, Vince Cable, said: "Today's figures are modestly encouraging and, taken alongside other indicators such as employment figures, suggest that things are going in the right direction."

Sterling hit its highest level against the dollar in two months after the news, rising by a cent and a half to $1.5450, amid speculation that the Bank of England will be less likely to expand its emergency quantitative easing programme against the background of a healthier economy.

"From a policy point of view, the signs that the UK economy may be growing, albeit weakly, are probably enough to put to rest any chance that the Bank of England would expand QE in May," said David Tinsley at BNP Paribas. Three of the nine members of the Bank's monetary policy committee voted for an expansion of QE at its April meeting.

A return to modest growth may also help to strengthen Osborne's hand in the tough negotiations with ministers over individual departmental spending plans, to be announced in June's spending review.

"Today's figure should provide some cover for the chancellor to continue on the path of fiscal austerity; we do not expect any major changes in the deficit reduction plan, at least this side of the general election," said George Buckley of Deutsche Bank.

However, Tony Dolphin, chief economist at the Institute for Public Policy Research, said the big picture revealed by yesterday's figures was one of an economy that was "stuck in a rut". The ONS said GDP was 2.6% below its pre-crisis peak in 2008, making the recovery weaker than that from any recession since the 1930s.

"Normally, we would expect the economy to grow by around 12% over any five-year period," said Dolphin. "The fact that it has contracted by 2.6% instead means almost 15% of potential output has been lost, along with the employment opportunities and tax revenues that would have accompanied it."

David Brown of New View Economics said: "The government have been very, very lucky. They have avoided a third dip into recession by the skin of their teeth. There is nothing to celebrate over as the UK economy is not out of the woods yet."

IMF officials are due to arrive in London next month to scrutinise the government's tax-and-spending policies, as part of its annual health check of the economy, after chief economist Olivier Blanchard accused Osborne of "playing with fire".

Dhaval Joshi of BCA Research said the government's continued commitment to austerity was in contrast to the shift in approach from the eurozone countries, with Greece, Spain and Portugal being given extra time to reach their deficit-reduction targets. He argued that planned cuts would depress growth more dramatically in the UK between 2012 and 2015 than in crisis-hit Italy or Spain.

"Just like the UK, the monetary union's third- and fourth-largest economies have been in extended, austerity-caused economic stagnations. But for Italy and Spain, peak austerity is now over," he said.

"The UK government shows no sign of budging from its plan A, while euro area policymakers are signalling a shift away from aggressive fiscal consolidation."

Despite the snow and unusually cold weather in the first three months of the year, the ONS denied that the weather had had much impact on the figures. While retailers suffered in January and March, that was partly offset by increased demand for energy from householders turning up their heating.

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Article source : http://www.guardian.co.uk