As well as forecasting growth of 3.1% this year, the Chamber believes inflation will remain slightly below target over the balance of the year. Unemployment will continue to fall, government borrowing will also fall and the service sector will lead the recovery as manufacturing and construction output also rise.
Commenting on the Economic Outlook, Chief Economist at Greater Manchester Chamber of Commerce, John Ashcroft (pictured), said:
“We have increased our forecasts for manufacturing output, modifying slightly the outlook for construction and investment. We now expect investment to increase by 8.3% in 2014 and by 7.5% in 2015 following revisions to the calculation of the investment data.
“Manufacturing output remains almost 5% below the peaks registered in 2008 prior to recession. Following a fall in output of -1.3% in 2012 and -0.1% in 2013, we expect a recovery in output this year of 3.7% slowing to below 3.0% in 2015. Construction output, driven by developments in housing and infrastructure, is expected to increase just around 5.5% in the year and 4.0% in 2015.”
Commenting on the latest trade figures, John continued: “The trade figures will continue to disappoint. The UK will be unable to grow faster than major trade partners in Europe without a significant deterioration in the trade balance. The challenge to the current account following the collapse in overseas investment income may present a significant problem to the outlook for sterling over the medium term.
“In Europe the challenge of low growth and a risk of deflation contrasts significantly with the outlook for the UK. Despite the strong performance of the UK economy and the strength of the housing market, the Bank of England is unlikely to raise base rates too far ahead of the Fed and the ECB, therefore we expect rates to rise in February or June 2015.”