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Consumers and business group more upbeat on economy
August 29, 2013 / 11:19 PM / 4 years ago

Consumers and business group more upbeat on economy

LONDON (Reuters) - Britain’s consumers and its largest business association both have a more upbeat view of the economic outlook following a raft of positive news about the country’s recovery, two reports showed on Friday.

Shoppers walk past a temporary store front display in central London August 15, 2013. REUTERS/Toby Melville

The GfK NOP consumer sentiment index touched its highest level since October 2009 this month, rising more strongly than forecast on a rosier view of the economy among households.

And the British Chambers of Commerce revised up its gross domestic product (GDP) forecasts to predict growth of 1.3 percent in 2013 and 2.2 percent in 2014 - 0.3-0.4 percentage points higher than its last forecast and above economists’ consensus in a Reuters poll earlier this month.

Britain’s economic prospects have picked up sharply since the start of the year. Growth of 0.3 percent in the first three months increased to 0.7 percent in the second, helped by reduced euro zone tensions and government policies to help home-buyers.

As well as rising house prices, recent economic data has shown stronger industrial output and a narrowing trade deficit, prompting the BCC to forecast that a slow rebalancing of the economy away from domestic consumption was set to continue.

The business lobby group also predicts unemployment will fall steadily, reaching the 7 percent threshold at which the Bank will consider raising interest rates by late 2015 - nine months earlier than the central bank expects.

However, BCC director general John Longworth warned the recovery was not yet secure and future trouble in the euro zone and the Middle East as well as an economic slowdown in China could yet derail growth.

“We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks,” Longworth said.

GfK NOP managing director Nick Moon said the rise in consumer sentiment to -13 from -16 in July also presented a paradox, as meagre wage growth and above-target inflation mean household incomes are falling in real terms.

“With UK living standards at their lowest for a decade, the British public’s economic confidence continues to grow strongly - a conundrum of Alice in Wonderland proportions,” he said.

Greater media coverage of economic good news rather than data showing falling incomes might be responsible, Moon said.

The GfK data showed that households’ assessment of their own financial situation was unchanged on the month, while their view of the general economic situation had improved.

August’s index reading is still below the average for the series’ 40-year history of -9.

Reporting by David Milliken; Editing by Hugh Lawson

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