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UK economy in 'steady' recovery

Source BBC News@

Cranes and a buildingThe CBI said that more construction was one of the reasons for the pick-up in growth

The UK economy is recovering at a "slow and steady" pace, business lobby group the CBI has said.

It predicts growth this year of 1.4%, up from the 1.2% forecast in August, following a strong third-quarter performance.

The CBI expects the same growth rate of 1.4% again in 2014.

"The recovery that started in the service sector has fanned out to manufacturing and construction," CBI director-general John Cridland said.

Latest official figures showed that the UK's economy grew by 0.8% between July and September, with the Office for National Statistics saying there had been a "fairly strong" performance across all sectors.

'Better-rooted' growth

"The UK is now set fair for growth with confidence returning to Britain's entrepreneurs," Mr Cridland added.

"The recovery won't be spectacular, just slow and steady, but appears more solid and better-rooted."

On Friday, a closely-watched survey added to signs of strength in UK manufacturing as the latest Markit/CIPS Purchasing Managers' Index indicated the sector had continued to grow strongly in October.

Despite speculation among some analysts that interest rates may rise sooner than expected due to the stronger economic growth, the CBI said that it still expects rates to stay at record lows until 2015.

"We expect unemployment to come down relatively slowly over the medium-term, as hours worked increase and productivity begins to recover. Consequently, the CBI expects Bank rate to remain on hold in 2014 and 2015," it said.

Bank of England policymakers have also spoken out in a n attempt to dampen expectations of a rate increase in the near future.

Under the policy of forward guidance, the Bank has said that it will not consider raising interest rates until the unemployment rate has fallen to 7% or below.

The latest unemployment figures showed that the jobless rate stood at 7.7% in the June-to-August period.

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