The growth outlook for the UK economy has once again been upgraded significantly by the International Monetary Fund.
In its latest World Economic Outlook, released yesterday, the IMF revised its estimate of British GDP growth this year to 3.2 per cent, up from 2.8 per cent in April. Reflecting the sudden and unexpected nature of the recovery, a year ago the IMF was forecasting growth of just 1.5 per cent for 2014,
The Office for National Statistics will reveal its preliminary GDP estimate for the second quarter of 2014 today, with analysts expecting it to show that output has finally edged above its 2008 pre-crisis peak.
This is the fourth time in a row the IMF has upgraded the UK. Its latest estimate would make Britain the fastest- growing advanced economy in the world this year. There was also an upgrade to the UK’s outlook for 2015, with the IMF increasing its estimate from 2.5 per cent to 2.7 per cent. “Britain is now in the fast lane of recovery,” said the Chief Secretary to the Treasury, Danny Alexander.
By contrast, the US outlook was hit by a large downgrade on the back of the shock contraction in the first quarter caused by exceptionally severe winter weather. The IMF cut its 2014 forecast to 1.7 per cent, down from 3 per cent previously.
There was also a downgrade for France and Italy, which are expected to grow by 1.9 per cent and 0.7 per cent respectively this year, both down 0.3 percentage points on the previous forecasts. The growth rates of Japan and Germany have been upgraded by 0.2 per cent and 0.3 per cent respectively. But growth in both is expected to be well below Britain’s, at 1.6 per cent and 1.9 per cent.
But the US is expected to outstrip Britain next year with growth of 3 per cent, says the IMF. And there were signs of weakness in the latest UK retail sales figures, released yesterday, which showed a disappointing 0.1 per cent increase in June after a 0.5 per cent decline the previous month. “Clothing was the biggest drag – potentially due to the later than normal start to seasonal sales,” said Alan Clarke, an economist at Scotiabank. “That should prove temporary.”