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Economy to enjoy ‘Indian summer’ – report

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16/07/2012
Latest forecasts suggest the economy will return to growth over the next six months, boosted by falling inflation and a pick-up in consumer spending.
Economy to enjoy ‘Indian summer’ – report

Analysis from Ernst & Young (E&Y) predicts falling inflation will mean consumers will have extra cash to spend on the high street.

However, the report said the UK will only achieve zero growth in 2012 as a whole. It said longer term, sustainable growth remained dependent on an improvement in the UK’s export performance and business investment.

E&Y forecasted 1.6% GDP in 2013 and 2.6% in 2014.

Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, said: “Spiralling inflation has cut real wages by 7.5% over the last four years, but the squeeze is almost over.

“Inflation is now coming back to heel, helped by the Chancellor’s decision to postpone the increase in fuel duty, falling energy and commodity prices, plus tax changes dropping out of the calculation.

“The boost to household finances and the subsequent pick up in spending should be enough to push the UK back into positive territory this year, but don’t expect a consumer led recovery further out. Longer term, consumers are going to be more focussed on reducing their debt burden rather than splashing the cash.”

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