OECD Says UK Recovery on Track Up to 2016

Britain’s economic recovery will continue into 2015 and 2016, driven by consumer spending and business investment, according to the Organisation for Economic Co-operation and Development.

The Paris-based thinktank said high job creation had fuelled UK growth, which it forecasts at 3% this year. The OECD is predicting growth of 2.7% in 2015 and 2.5% in 2016.

“Growth has been propelled by high job creation and is set to continue at a strong pace in 2015 and 2016, underpinned by robust private consumption and investment. Private consumption has been the main engine of the expansion, amid strong job creation, and business investment continues to recover strongly, supported by diminishing uncertainty,” the OECD said in its latest economic outlook report. “GDP growth is set to continue at a strong, if slightly easing, pace, despite fiscal consolidation.”

UK export growth has been weak so far, the organisation noted, pushing the current account deficit to close to 5% of GDP. It said exports could weaken further if eurozone growth comes in below expectations.

Wage growth – which has been unexpectedly weak in 2014 – should start to pick up, it said, adding: “Stimulating retraining and encouraging migration in occupations where shortages arise would reduce labour mismatches and support balanced growth through higher productivity.”

The OECD cautioned however that if productivity does not recover as expected, it could translate into weaker UK growth.

“Robust productivity is an essential condition for strong and sustainable growth, and uncertainty over its recovery is a major risk to the projection. Labour market pressures could disconnect real wage growth from productivity and lead to cost-push inflation.”

via The Guardian

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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