Economy will grow quicker than expected, says BCC, as consumer confidence rises

The UK economy will grow quicker than previously thought according to the British Chambers of Commerce, which has just revised its economic growth forecast for this year up from 0.9% to 1.3%.

The BCC has made a sunnier forecast thanks to stronger-than- expected GDP growth in Q2 2013, a strong service sector, and household consumption.

In a double-whammy of good news, there has also been a rise in consumer confidence according to research from GfK, whose Consumer Confidence Barometer has increased by three points this month to -13. This is its highest level since October 2009.

Back on the economy at large, the BCC has also increased its forecasts for 2014 from 1.9% to 2.2% in 2014, and for 2015 from 2.4% to 2.5%.

And unemployment is now expected to fall to 2.45 million (7.5%) in the third quarter of 2014, some 200,000 lower than the BCC forecast in May. The BCC thinks the Monetary Policy Committee’s 7% unemployment threshold will be reached will be reached by the final quarter of 2015 (nine months ahead of the MPC’s predications).

The BCC also reported that business investment grew by 0.9% in Q2 2013. It had, however, fallen in Q4 2012 and Q1 2013 so for the whole year is expected to drop by 2.8% in 2013.

John Longworth, Director General of the British Chambers of Commerce, said: “The improved outlook is testament to the steadfast determination shown by businesses in previous quarters, who have consistently displayed confidence in the face of unwarranted pessimism over the economy.

“Unfortunately however the recovery is not yet secure. We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks.

“There are many external factors, such as the eurozone, the Middle East, and the Chinese economy that could halt our progress.”

Longworth called on the government and Monetary Policy Committee to do more to give SMEs access to finance “on reasonable terms”, and the give support to “have a go” exporters.

Talking about the Consumer Confidence Barometer, Nick Moon, MD of Social Research at GfK, said: “As more and more official figures show that we are all worse off, with UK living standards at their lowest for a decade, the British public’s economic confidence continues to grow strongly – a conundrum of Alice in Wonderland proportions. […]

“So how to explain this seeming paradox of confidence rising while real income falls? This month offers a possible partial explanation, with the elements relating to personal finances stable, while those relating to the country as a whole rising. However this is only a partial explanation, because in recent months the personal finance items have also been rising.

“The explanation probably lies in the fact that there has been a steady flow of economic good news over the past few months showing the economy growing – however anaemically – and even the double dip recession revealed by revised ONS figures never to have existed.

“With these figures receiving far more prominence than reports about declining real incomes, it is perhaps not surprising that people react to all this good news by declaring themselves more optimistic.”

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