The U.K. economy will grow faster than previously forecast as rising house prices support consumer spending, the National Institute of Economic and Social Research said in a report today.
Gross domestic product will expand 2.5 percent this year, more than the 2 percent the London-based group forecast in November. The unemployment rate will reach the 7 percent threshold for the Bank of England to consider an interest-rate increase in early 2014, it said, revising an earlier assessment there there was a one-in-five chance of that happening in the first quarter.
“We expect consumer spending to remain the key driver of the recovery in 2014 and 2015, supported by continued buoyancy in the housing market,” Niesr said. “The U.K.’s economic recovery has become entrenched.” U.K. house prices rose 1.1 percent in January as improving consumer sentiment helped boost demand, Lloyds Banking Group Plc’s Halifax division said yesterday. Niesr said there’s “considerable uncertainty” over the impact on the housing market from of the government’s Help to Buy program to get more Britons onto the property ladder.
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