The UK economy received a double boost on Tuesday, as the IMF increased its growth forecast and strong production figures were released.
For the second time in six months the IMF increased its growth forecast for UK GDP to 2.9% in 2014 and 2.5% in 2015, up from 2.4% and 2.2% respectively, whilst warning that risks from “surging” house prices and reliance on the banking sector remained.
With inflation currently running at an acceptably low level and seemingly back under control, the Bank of England indicated that it was unlikely to see interest rates rising until the second quarter of 2015.
Separately, statistics released by the Office for National Statistics earlier in the week, showed manufacturing output increased by 1% in February, compared with January, the biggest increase since September. The annual increase from January last year was 3.8%, the highest for three years and output now stands at its highest level for two and a half years, with companies reportedly optimistic about trading conditions at home and abroad.
The growth was driven particularly by the pharmaceuticals, transport, equipment, food and beverages and tobacco sectors and industrial output figures, which also include power generation and North Sea oil production, were up by 0.9%, though partly this was due to a ‘bounce back’ from January figures hampered by tough North Sea weather conditions.
In addition, a survey by the British Chambers of Commerce showed six key manufacturing indicators, including investment plans, were at an all-time high in the first quarter and services were strong too with exports at a record high.
Economic think tank NIESR said that the output data pointed to 0.9% growth in the economy in the first quarter – which would be the fastest rate since the second quarter of 2010 and an acceleration from 0.7 percent in the last three months of 2013.