News Column

Booming firms expect rates to be hiked early

May 30, 2014

MICHAEL BIRD



THE BRITISH economy is continuing to pick up pace, with new figures forecasting even stronger growth this year and pushing forward expectations for the first interest rate hike since the financial crisis.


The Confederation of British Industry (CBI) said this morning that UK economic growth now looks stronger than at any point in the last 11 years.


In its latest survey of businesses, 35 percentage points more firms reported an increase in output during the past three months than recorded a drop, the highest the CBI has seen since it began the series in 2003. Confidence is also on the rise, with GFK's confidence index now out of negative territory for the first time in nine years.


With no signs of the recovery slowing down, the British Chambers of Commerce (BCC) also hiked its growth forecast today, predicting the economy will grow by 3.1 per cent this year. In 2015, it expects growth of 2.7 per cent, up from 2.5 per cent previously.


The move means that the business group now thinks the first hike in interest rates from the Bank of England will come in the first quarter of 2015, six months earlier than it had previously forecast. The bullish outlook also shows signs of feeding through to households too. Data firm Markit has found that 47 per cent of families expect a rate hike in the next 12 months, a new high, while nearly a quarter expect the rise to begin in less than six months.


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Source: City A.M. (UK)


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