3.1% GDP Growth Forecast for 2014

The British Chamber of Commerce is raising its GDP growth forecast from 2.8% to 3.1% in 2014, and from 2.5% to 2.7% in 2015. The following is a brief overview of it’s Economic Forecasts.

• For 2016, GDP growth forecast remains unchanged, at 2.5%.

• Consumer spending will remain the main growth driver, but its contribution to GDP will fall, particularly after official interest rates start to rise. This is one of the main reasons for the expected slowdown in GDP growth in 2015 and 2016.

• In terms of sectors, the main contributor to UK growth in the next three years will be services. But manufacturing and construction will also record satisfactory positive growth.

• Business investment is expected to record relatively strong positive growth of 8.8% in 2014, 7.4% in 2015 and 7.4% in 2016, albeit from a low base.

• The first increase in UK interest rates is expected to be in Q1 2015 to 0.75% – two quarters earlier than previously forecast. Further modest increases can then be expected, in small 0.25 percentage point steps, with official interest rates reaching 1.25% in Q4 2015 and 2.25% in Q4 2016.