Hurrah! The economy is growing at its fastest since 2007

Business confidence is up, consumer confidence is up. What's not to like?

by Emma Haslett
Last Updated: 27 Jun 2014

Caloo, calay: not only is it Friday – only one more sleep until MT gets to send out its weekend briefing (sign up here) – but almost all the business organisations in the land have decided to raise their growth forecasts for the UK.

We’ll start with the British Chambers of Commerce, which last night revised its expectations British GDP growth to 3.1%, up from 2.8% before. To put that into context, the UK hasn’t grown by more than 3% since 2007. But wait – there’s more: it’s also raised its 2015 forecast to 2.7%, up from 2.5% before.

Unfortunately, for those of us with debts, it also reckons the Bank of England will raise the interest rate to 0.75% in the first quarter of 2015, two quarters earlier than it had originally expected.

Meanwhile, the CBI said business confidence hit a ‘record high’ in May: its survey of 726 businesses suggested a balance (ie the percentage of businesses who are positive, rather than negative) of 35% said activity had increased in the past three months, up from 25% in April. That’s its highest reading since 2003.

What’s particularly interesting is a survey by German market researcher GfK, whose index of consumer sentiment rose above zero – meaning more people are positive about their financial situation as are negative about it – for the first time in more than nine years. If even the Germans are cheering up, something good must be happening, right?

Over the past 14 months, the index has climbed 27 percentage points, its sharpest rise since 1977, the company said. Sounds like good news, but it’s worth pointing out that 1977 was also the year everyone thought the UK was about to come out of stagflation, when in fact the Winter of Discontent was just around the corner. So it’s important to remember that consumer sentiment is exactly that: sentiment, rather than scientific analysis.
Perhaps it’s best to heed John Longworth, the BCC’s director general, when he pointed out that there’s still a lot of work to be done.

‘Our forecast confirms that Britain is leading, rather than following, other major economies when it comes to short-term growth. The task at hand is to ensure that 2014 is not "as good as it gets" for the UK economy.’ Quite.

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