UK Think Tank Predicts 2.8% Growth in 2015

Low inflation and stronger eurozone growth should help the UK economy expand 2.8% this year despite political uncertainty ahead of the election, according to an EY Item Club report.

It said low inflation was adding to the benefits of higher employment and the positive effects of lower oil prices.

Item Club chief economic adviser Peter Spencer said the financial markets seem prepared for further Greek problems.

But potential headwinds were a weak government and EU referendum, he said.
The forecast growth is slightly down on the 2.9% expansion that the Item Club previously predicted, due to official fourth-quarter GDP figures coming in weaker than expected.

The Item Club forecasts growth in 2016 of 3%, up from 2.9% estimated previously.
Inflation has fallen to zero in recent months and, along with improvements in employment, is boosting consumer confidence, the Item Club’s spring forecast said.

The report said an added bonus was coming from recovery in the eurozone, helped by the European Central Bank’s €1.1 trillion (£790bn) asset purchase stimulus programme.

The euro bloc’s recovery should offset a hit to overseas trade from the strength of the pound, the Item Club said.

Mr Spencer said: “The economy is taking the general election in its stride as ‘noflation’ trumps politics. The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.

“This is a mirror image of what we saw in 2010-12, when unemployment and inflation were high and Europe was in the doldrums.

via BBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza