Economic growth picks up

UK economic activity increased at the fastest pace in four months, according to the latest Growth Indicator from the CBI.

The survey of 769 businesses across the retail, manufacturing and services sectors revealed that growth rose at a solid pace in the three months to January, with a balance of +23 compared with +14 in December, following slowing momentum over the second half of 2014.

The figures reflect a bounce-back in the business and professional services sector, and a solid showing in retail, the latter reflecting a bumper Christmas trading period.

However, growth remained more moderate in the manufacturing sector as a sluggish exports performance offset decent levels of domestic activity.

Looking ahead, growth is expected to rise in the current quarter (+28) but remain below the strong readings seen in the first half of 2014.

Rain Newton-Smith, the CBI’s director for economics, says: “Overall, economic growth in the UK remains solid. Low oil prices and benign inflation are providing a boost, supporting household incomes and spending. We’ve already seen the impact through a Christmas bonanza for retailers.

“However, political headwinds both at home and abroad are feeding an atmosphere of uncertainty for businesses. While quantitative easing in the Eurozone should be positive the UK economy, its impact will be dimmed without structural reforms elsewhere in Europe.

“At home, low productivity threatens to hold back any recovery we’re seeing in real wages, so we need to see skills levels rising through better vocational education and in-work training.”