'UK economy getting back on its feet - but not out of the woods yetÂ’ - ITEM Club

'UK economy getting back on its feet - but not out of the woods yet? - ITEM Club

After growth of just 1.7% over 2005, the ITEM Club?s Winter forecast shows UK growth rallying at 2.3% this year and moving towards 3% in

2007. ITEM believes last August?s quarter-point cut in interest rates should be enough to sustain the recent revival in the high street without a renewed surge in borrowing. Thus the Club sees base rate remaining at 4.5% over 2006 - though the welcome recent fall in the CPI towards its target level should leave the MPC free to make a further cut if necessary.

Rising energy prices, higher personal saving and higher tax payments caused by 'fiscal drag' will moderate the rise in disposable income and leave consumption growing more slowly than GDP - in strong contrast to recent years. With European markets strengthening and the Middle East booming, this finally opens the way for exports to move ahead this year and for increased business investment next year. But the ITEM Club warns that the outlook is prone to many uncertainties which it examines in its report.

Full report (374Kb PDF)

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