NIESR predicts UK economic recovery gathered pace in July

Wednesday, 07 August 2013 08:00

The National Institute of Economic and Social Research (NIESR) estimates that GDP output grew by 0.7 per cent in the three months ending July.

This suggests that the growth seen in the first half of the year is set to continue. Economic output in the UK grew by 0.3 per cent in the first quarter of 2013, and then doubled to 0.6 per cent in the three months to the end of June.

NIESR said: "These estimates suggest a narrowing of the UK’s large negative output gap," and that consumer spending growth has “underpinned the recent gains in economic momentum, in spite of the continued decline of real consumer wages.”

Earlier this week, the Markit Purchasing Managers’ Index (PMI) from the dominant services sector showed the fastest growth for over six years in July, prompting a raft of economists to upgrade their forecasts for GDP growth in the UK this year.

NIESR upgraded its forecast for the UK last week by 0.3 per cent for both 2013 and 2014. It now expects the UK economy to grow by 1.2 per cent in 2013 and by 1.8 per cent in 2014 and it now predicts that the UK won’t reach the level of economic activity seen at the peak in 2008 before the financial crisis arrived until sometime in 2015.

Last month, Ernst & Young’s ITEM Club also raised its growth forecast for 2013 up from 0.6 per cent to 1.1 per cent and in a moral victory for the Chancellor, George Osborne, who was criticised by the International Monetary Fund (IMF) for not slowing the pace of austerity earlier in the year, in July the IMF upgraded its forecast for UK economic growth in 2013 from 0.7 to 0.9 per cent.

Meanwhile, Howard Archer, Chief UK & European Economist at IHS Global Insight announced that his organisation was also upgrading its GDP forecast.

He said: “Following the very strong services sector purchasing managers survey for July, we are raising our third-quarter GDP growth forecast to 0.7% quarter-on-quarter. This raises our 2013 GDP growth forecast further to 1.3%.

“However, we maintain our longer-term views and we are sticking to our GDP growth forecast of 1.9% in 2014.”


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