UK heading for fastest GDP growth since 2007

UK heading for fastest GDP growth since 2007.

Economists believe that the UK economy is heading for its fastest expansion since before the financial crisis, subsequently upgrading their forecasts for growth through 2015.

Gross domestic product will rise 1.3% this year, and 2% in 2014 – a pace of growth that would be the fastest since 2007.

Economist Jens Larsen said that, “The consensus forecast has moved a long way very, very quickly”.

Meanwhile, Bank of England Governor Mark Carney still questions how quickly this recovery can lower the UK’s unemployment rate, after he introduced forward guidance last month and linked the jobless rate directly to the policy stance. BOE policy makers believe that productivity will pick up as the economy recovers, meaning that UK companies will get more output from their existing workers, which will limit the pace of hiring.

“If you get a very powerful recovery, the arguments for guidance, for the extended period of low rates, just look so much weaker. It’s a bit of a communication challenge”, Larsen added.

Economists also see GDP growth accelerating to 2.4% in 2015, whereas consumer spending will rise 1.6% this year and in 2014, while exports will increase 1.8% and 4.7%.

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