UK economy is expected to grow

The economy was healthy in the second quarter with gross domestic product (GDP) 0.8% higher than the previous quarter and 3.6% higher than a year ago, according to official figures.

Manufacturing output is at its highest level since the first quarter of 2001. It was 0.7% higher than the first quarter of 2007 and 1.0% higher than the same quarter last year.

The economy is expected to grow by between 2.4% and 3.1% this year, according to the latest estimates for GDP from around 40 forecasters collated by the Treasury. The average (median) for GDP forecasts is 2.8%. Next year the range is from a contraction of 0.3% to 2.8% growth, with an average of 2.4%.

Inflation forecasts, as measured by the Retail Prices Index, range from rises of 2.9% to 4.5%, with an average of 4.0% for this fourth quarter. For the fourth quarter 2008 the range is 1.7% to 4.6% with an average of 2.7%.

Average earnings forecasts range from a 3.5% rise up to a 5.0% rise, with an average of 4.2% in this fourth quarter. For the fourth quarter next year the rises range from 3.5% to 4.9%, averaging at 4.2%.

PM Gordon Brown lectured the TUC on the need for public sector pay restraint to control inflation (see page 4). But public sector earnings growth was down to 2.3% in the year to July and inflation was 3.8%.