Above: The CBI's Katja Hall announces upgraded growth forecasts for the UK economy. (C) Pound Sterling Live 2015.
โNow is not the time for complacency, but falling unemployment coupled with improving wage growth and rock bottom inflation should mean that people see more money in their pockets.โ - Katja Hall, CBI Deputy Director-General.
The pound sterling was subjected to positive eco-stats at the start of the new week when it was announced the CBI upgraded its growth prediction for 2015.
The upgrade comes courtesy of lower oil prices and inflation.
Furthermore, job creation continues apace and wage growth is finally picking up.
CBI economists bumped up their growth forecast for 2015 to 2.7% (from 2.5% expected in November.
Katja Hall, CBI Deputy Director-General, tells us:
โUK growth continues to outshine its counterparts in Europe and progress is โsteady as she goesโ.
โWhile lower oil prices are keeping costs down for businesses and consumers, the North Sea oil companies are suffering, harming jobs and investment in the industry.
โNow is not the time for complacency, but falling unemployment coupled with improving wage growth and rock bottom inflation should mean that people see more money in their pockets.
โBut businesses are looking on anxiously as insecurity continues to troll the Eurozone and instability remains elsewhere.โ
Forecast Snippets:
- GDP growth is expected to rise by 0.7% each quarter.
- GDP is then forecast to grow strongly in 2016, by 2.6% over the year as a whole.
- This translates into growth of 0.6% a quarter.
- The price of oil is expected to remain below $65 per barrel by the end of 2016.
- On the back of lower oil prices, consumer price inflation is expected to stay below 1% throughout most of 2015.
- UK unemployment rate is expected to continue its downward trend in 2015 and into next year, levelling off at 5.2%, while wage growth is expected to reach 3.0% by Q4 2016.
Pound to Euro: Struggling above 1.35
Turning to the markets, we note the pound appears to have run into resistance against the euro.
"Sterling gains continued on Friday as limited data came out of either country. Reaching 1.3533, this pair is still struggling to hold gains above 1.35. This morning saw an encouraging report break as the CBI raised growth forecasts from 2.5% to 2.7% on the back of low oil prices. Furthermore, as house prices have shown constant signs of growth, economists are now considering if we can call an end to the housing slowdown," says Raphael Sonabend, FX Analyst at CaxtonFX.
Despite positive UK revisions this morning, in anticipation of the Eurogroup meetings today, the euro strengthened as a result of optimistic reports.
