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2015 growth forecast raised to 2.9% by EY Item Club

19 Jan 2015

The respected EY Item Club has just released its Winter forecast for 2015 for UK GDP, and raised its October forecast from 2.4% to 2.9%

As the UK is a big gainer from the huge drop in the oil price and associated energy costs, the UK consumer will receive a big financial shot in the arm, alongside an average inflation rate for the year close to zero. This inflation outlook means that interest rates are now unlikely to rise until early 2016

The UK housing market has recently cooled a little, with one factor being the rising fear of an earlier-than-expected interest rate rise. Since the lower oil price has all but removed this fear, the Item Club expect the housing market to receive a renewed push - especially now that real incomes have started to grow, which are known to be a major driver of the UK housing market

On the downside, they point out that risks include deflation in the eurozone which has lead to a weaker euro, meaning that eurozone exports will become cheaper and compete with UK exports. They also mentioned the upcoming UK General Election (May), which has added uncertainty for investment and investors.

Overall, prospects have brightened but risks remain - for the summary and full forecast click here

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