Sunday, July 14, 2024 12:10pm
Economic forecasters are rushing to upgrade their outlook for the UK after the economy beat expectations again in May.
Figures released last week showed the economy grew by 0.4 percent after stagnating in April, double the rate experts had expected.
Gross domestic product (GDP) is now 0.7% higher than it was last June, just before the shallow recession began.
These figures have led many City forecasters and investment banks to raise their outlook for the coming months.
Deutsche Bank’s UK economist Sanjay Raja now sees the economy growing 0.6% in the second quarter, up from 0.3% at the start of the year, and Barclays also sees 0.6% growth.
Meanwhile, Goldman Sachs and Capital Economics both expect the UK to achieve a similar performance to the 0.7% growth it achieved in the first quarter of this year.
Looking out to 2024 as a whole, both Goldman and Barclays estimate the UK could grow by 1.1%, while Deutsche Bank predicts a 1.2% expansion.
These forecasts are much more optimistic than the Bank of England, which in May predicted an annual expansion of 0.4%.
The growth rate exceeded the Office for Budget Responsibility’s traditionally optimistic forecast. The fiscal watchdog said: Annual growth in March was 0.8 percent.
But looking ahead, most economists believe quarterly growth will slow. “Growth has been incredibly good recently,” said Rob Wood, chief UK economist at Pantheon Macroeconomics.
Wood noted that recent business surveys have shown a slowdown in activity: S&P’s services purchasing managers’ index, for example, fell to its lowest level in seven months in June.
Economists at Barclays agreed that momentum was slowing. “We believe first-half results partly reflect an economic recovery after last year’s slowdown and temporary seasonal effects, and therefore overstate underlying growth,” he said.
But they pointed to evidence that winning an international soccer tournament could generate additional economic momentum.
“The academic literature suggests that if England wins the European football championship on Sunday, it could potentially generate a positive boost to GDP,” the researchers said.