The UK economy is poised for accelerated growth this year, with analysts revising their GDP forecasts upwards following a strong first-quarter performance that saw GDP expand by 0.6%, representing the fastest growth in nearly three years.
Investment banks and advisory firms in the city responded positively to the data, indicating a brighter economic outlook and increasing recovery momentum.
Deutsche Bank raised its annual growth forecast to 0.8% from 0.5%, while Pantheon Macroeconomics and Capital Economics revised their forecasts to 0.8% from 0.6%. Thomas Vieladek of T. Rowe Price is more optimistic, indicating the possibility of growth ranging between 0.8% to 1% this year, which exceeds expectations set by international organizations such as the International Monetary Fund, the Organization for Economic Co-operation and Development, and the Bank of England.
The Office for National Statistics (ONS) has reported upward revisions to historical GDP data, indicating continued expansion in per capita output, a positive sign of economic recovery. Deutsche Bank's Sanjay Raja described the recovery as “resounding,” highlighting the economy's resilience in overcoming the recent technical slump.
Strong performance in the services sector, coupled with stronger-than-expected business investment and nominal consumer spending, contributed to first-quarter growth. Household consumption is expected to continue to rise as inflation declines and real income rebounds, further boosting economic activity.
Expectations of potential interest rate cuts by the Bank of England add to the positive outlook, with analysts suggesting that further stimulus could accelerate growth. However, Jeremy Hunt, the Chancellor of the Exchequer, faces restrictions on fiscal policy amid rising market interest rate expectations and uncertainties surrounding the upcoming general election.
Despite these challenges, high economic growth indicates a promising trajectory for the UK economy, supported by resilient consumer spending and a broader sector recovery. As the nation emerges from recession, optimism abounds about sustainable growth and a return to pre-pandemic levels of economic activity.
