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The UK economy is poised for accelerated growth this year, with analysts revising GDP forecasts upwards following robust first-quarter performance that saw GDP expand by 0.6%, marking the fastest growth in nearly three years.
Investment banks and City consultancies have responded positively to the data, signalling a brighter economic outlook and increased momentum for recovery.
Deutsche Bank raised its annual growth projection to 0.8% from 0.5%, while Pantheon Macroeconomics and Capital Economics also adjusted their forecasts upwards to 0.8% from 0.6%. Tomasz Wieladek of T Rowe Price is even more optimistic, suggesting the potential for growth between 0.8% and 1% this year, surpassing expectations set by international organizations like the International Monetary Fund, OECD, and the Bank of England.
The Office for National Statistics (ONS) reported upward revisions to legacy GDP data, indicating sustained expansion in output per capita, a positive sign for economic recovery. Sanjay Raja of Deutsche Bank described the rebound as “resounding,” highlighting the economy’s resilience in overcoming a recent technical recession.
Robust performance in the services sector, coupled with stronger-than-expected business investment and nominal consumer spending, contributed to the first-quarter growth. Household consumption is expected to continue rising as inflation eases and real incomes recover, further bolstering economic activity.
Anticipation of potential interest rate cuts by the Bank of England adds to the positive outlook, with analysts suggesting further stimulus could accelerate growth. However, Jeremy Hunt, the chancellor, faces constraints on fiscal policy amid heightened market interest rate expectations and uncertainties surrounding the upcoming general election.
Despite these challenges, elevated economic growth signals a promising trajectory for the UK economy, supported by resilient consumer spending and broader sectoral recovery. As the nation emerges from recession, optimism abounds for sustained growth and a return to pre-pandemic levels of economic activity.