GDP growth of 1.2% in 2013 has been forecast by the CBI, a UK business lobbying organisation that represents 240,000 UK businesses at a national and international level.
This latest prediction from the CBI is an increase from its May forecast of 1% and follows a better than expected second quarter, as well as indications of a rise in confidence over a range of sectors such as construction, services and manufacturing. However the rebalancing of consumption with investment and trade is said to be taking longer than expected.
The CBI also anticipates that the UK economy will continue to improve in 2014 and expects GDP growth of 2.3%, over its forecast of 2.0% in May. It said household spending is expected to slowly strengthen during the second half of 2013 through to 2014, as confidence rises and disposable incomes are increased, helped by improved credit conditions and a stable labour market. Business and housing investment will also support domestic demand.
A positive boost to exports will be provided by a return to growth in the Euro area, along with a wider global recovery, but according to the CBI, a growth in imports will also be seen. Business investment is expected to grow by 7.3% in 2014 and export growth is predicted to increase from 0.7% in 2013 to 4.9% in 2014, although the net contribution of trade to GDP growth will remain subdued as domestic demand lifts import growth from -0.8% in 2013 to 4.4% in 2014.
CBI Director-General, John Cridland, commented:
“The economy has started to gain momentum and confidence is picking up, but it’s still early days.
“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.
“The Government needs to get behind talented UK businesses to help them break into new export markets and sell great British products and services around the globe.”
The CBI also expects that the rate of unemployment in the UK to stand at 7.8% in 2013 and will drop to 7.6% in 2014, which could result in interest rates remaining unchanged.