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Where is the UK economy heading to in 2014?

POSTED: 20th December 2013
IN: Business news
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As we head into 2014, it is interesting to take a look through the crystal ball and come up with some ideas on where the economy is heading in 2014.

undefined2013 has been characterised by an improving economy and a rise in consumer confidence and it is likely that this will continue into 2014.

GDP

Revised figures published on December 20th show the economy grew by even more in the first half of 2013 than was previously thought up to an annualised rate of 1.9 per cent.

Most economists believe the UK economy will grow by more than this in 2014 with the Bank of England, CBI, Office for Budget Responsibility and other organisations all raising forecasts in recent months.

The consensus is that the UK economy will grow by 2.5 per cent in 2014, finally becoming bigger than it was in the second quarter of 2008, the previous peak.

House Prices

House prices have been going up this year, by around five per cent overall and the Royal Institute of Chartered Surveyors (RICS) predicted on the 19th December that average UK house prices will rise by eight per cent in 2014.

Interest Rates

The latest official unemployment figures unveiled this week show the unemployment rate fell sharply from 7.6 per cent to 7.4 per cent, a big step towards the 7.0 per cent level that the Bank of England says will trigger a review of interest rates.

This has prompted economists to pencil in an earlier rate rise from the consensus of 2015. However, the Bank has repeatedly said it wants to see a concerted recovery before it looks to raise rates so I do not think there will a change in interest rates in 2014.

Inflation

Official figures showed inflation fell to 2.1 per cent in November. It may head up a little in the coming months but will fall to 2.0 per cent and possibly a little lower in the second half of 2014.

Unemployment

Unemployment fell to a four-year low of 2.39 million when the latest figures were published this week. The improving economy means this is likely to continue and unemployment may fall below two million by the end of the year.

FTSE100

The FTSE 100 started the year at 5950 and currently sits at 6589, a rise of over 10 per cent. A similar rise in 2014 would take the FTSE 100 to over 7000. Most economists believe it will be around 7000 by the end of the year.

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