LONDON, Aug. 28 (Xinhua) -- The British economy is set for above-trend growth this year and next year, according to a leading business representative group in its latest economic forecast issued Thursday.
The British Chambers of Commerce (BCC), which represents several thousand businesses, upgraded its growth forecast for 2014 by 0.1 percentage point to 3.2 percent, and for next year by the same amount to 2.8 percent.
Jobs growth was also predicted to be strong. The current unemployment rate is 6.4 percent, down from 7.8 percent a year ago, and BCC expects it to fall to 5.5 percent in Q2 2015 and 5 percent in Q2 2016.
These predictions indicate a confidence in the continued economic recovery, which has been underway since the beginning of 2013.
BCC director general John Longworth said the British economy would continue to outperform other developed nation economies, and would record the highest growth this year among G7 nations.
Britain was "leading, rather than following, other major economies when it comes to short-term growth," said Longworth.
However, the current good performance and its star status among G7 nations needs to be viewed in the context of economic performance since the onset of the recession caused by the financial crisis.
The British economy suffered a more serious impact than other G7 nations, and was much slower in its recovery than all the G7 nations bar Italy. It is only now making up ground that others -- notably the United States -- had made up.
The main driver of growth is household consumption, which will be difficult to maintain into the long-term especially in face of the current gap between the Consumer Price Inflation of 1.6 percent and annual wage growth of 0.7 percent.
David Kern, BCC chief economist explained: "Though our GDP forecasts have been upgraded for the next two years, we are predicting a slight slowdown in the pace of growth from next year. This reflects a deceleration in household consumption, and falling public spending as a share of GDP. Together, these factors will more than offset the increased contributions to GDP growth from investment and trade."
Kern added: "We predict strong growth of 0.8 percent per quarter in the second half of this year. But as interest rates start to rise in 2015, indebted households with mortgages will face increased financial pressures, and much weaker household consumption will act as a drag on growth."
Longworth warned that the current "stellar growth" must not be a "flash in the pan".
NEED TO EXPORT MORE
"We need to invest and export more, innovate, and build. It is disappointing that we have downgraded export growth for the next two years as a strong international trade performance is key if we are to steer away from a reliance on consumer spending," said Longworth.
Export growth for goods and services has been downgraded from 1.9 percent to 0.8 percent this year and from 4.2 percent to 4.1 percent in 2015, reflecting poorer official export figures for Q2 2014 than had previously been used in forecasts.
George Buckley, chief UK economist with Deutsche Bank, told Xinhua Thursday afternoon that UK export growth moved into negative territory in Q2 this year, and that excluding oils and erratics it was now runnning at close to -1 percent year on year.
Buckley explained the exports setback, "The UK's trading partners have performed worse than the UK in terms of growth over the past year. At 3.2 percent yoy UK GDP growth is now the fastest in the G7 by some margin (the US comes the closest at 2.4 percent)."
Buckley added: "Combined with stronger sterling over the past year and a half, that has led to UK exports performing worse than imports - the latter of which have done well thanks to a constant expansion of consumer spending for more than two years now."
The BCC said it also expected the first bank rate rise in nearly six years to come in Q1 2015, with a 25 basis point rise from the record low of 0.5 percent which has been in place since March 2009. BCC then expects the rate to rise to 2.25 percent by the end of 2016.