Outlook for economy

Confidence about the economy has grown just a tad, according to the latest forecast from around 40 City and institutional forecasts for the economy, collated by the Treasury in August.

The economy, as measured by gross domestic product (GDP), is now expected to grow by between 0.8% and 1.4% this year, and the midpoint (median) estimate is for 1.1% growth. The midpoint figure in July was 1.0%.The official forecast, produced by the Office for Budget Responsibility (OBR) in March, is for growth of just 0.6%.

The economy is expected to improve next year — the forecasts range from 1.1% up to 2.7% with a median of 1.7%; the OBR’s forecast is for 1.8% growth.

Inflation forecasts for the final quarter of this year, based on the Retail Prices Index (RPI), range from 2.1% up to 3.3% with a median estimate of 3.0%; the OBR estimate is a 2.9% rise.

However, inflation is expected to stay stubbornly high. The range of forecasts for next year widens to 2.2% at the bottom end up to 4.1% at the top, and the median is up to 3.2%; the OBR forecast is 2.9%.

Worker’s living standards will likely continue to fall this year as average earnings growth forecasts range from 0.6% up to 2.3% with a median of 1.5%; the OBR forecast is 1.4%.

For 2014, average earnings are expected to show growth of between 1.2% and 3.8% with a median forecast of 2.4%; the OBR forecast is 2.8%.

www.gov.uk/government/publications/forecasts-for-the-uk-economy-august-2013