EY Item Club: GDP to rise 2.8%
The EY Item Club spring forecast predicts that GDP will grow 2.8% this year and 3.0% in 2016, with CPI inflation averaging 0.1%.
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It also highlights that – barring major upsets in the election – favourable trends in commodity and export markets should outweigh the effects of political uncertainty.
The EY ITEM Club said that "while we accept the need for an official watchdog to be cautious, our forecasts are significantly more positive than the OBR Budget projections".
It added that the economy would take uncertainty over the general election "in its stride", with "prospects faced by a new government in May are not quite as dire as indicated by the OBR’s Budget arithmetic".
The report said that it will be difficult to raise the base rate while inflation remains below 1%, and estimate that CPI inflation will move back above 1% this winter as base effects fall out of the calculation, paving the way for the first rate increase in the Spring of next year.
The EY Item Club is forecasting that UK economic growth will remain healthy through to 2018, average just under 3% a year.
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