The UK economic system might have grown by as a lot as 17% within the three months to the tip of September, says the EY Item Club, however slower development might observe.
Shoppers splurged in the course of the interval as coronavirus lockdown restrictions had been lifted, it mentioned.
It is a rosier imaginative and prescient than the one supplied by Item Club economists in the summertime, however they warned that development for the remainder of 2020 can be far slower.
Growth for the ultimate three months will probably be 1% or much less, they predicted.
“The UK economy has done well to recover faster than expected so far,” mentioned Howard Archer, chief financial adviser to the EY Item Club.
“Consumer spending has bounced back strongly, while housing sector activity has also seen a pick-up, in part thanks to the stamp duty holiday.”
The economic system most likely grew 16-17% within the third quarter of the yr in contrast with the second quarter, it mentioned. It had been anticipating development of 12%.
Trade deal danger
While authorities assist such because the furlough programme has supplied “much-needed support”, development will now start to fade, mentioned Mr Archer.
The finish of the furlough scheme, beneath which staff had a part of their wage paid by the federal government, will imply increased unemployment and sluggish development, mentioned the forecasters, who use an identical financial mannequin to the Treasury.
That mentioned, the UK economic system is now predicted to regain its pre-pandemic measurement within the second half of 2023. Back in July, the EY Item Club didn’t count on that to occur till late 2024.
Official figures from the Office for National Statistics confirmed final week that The UK economic system continued its restoration in August, rising by 2.1% within the month, because the Eat Out to Help Out scheme boosted eating places.
It was, nonetheless, smaller than economists had estimated and helped drag down the estimated tempo of restoration for the yr.
As with any financial forecast, there are components which might pace up or decelerate the restoration, the economists mentioned.
A vaccine is probably going to assist the economic system, however there are extra doubtless threats to development than there are shock boosts.
Factors that would crush development embrace a drop in client spending, extra lockdown measures, sluggish Brexit negotiations between the UK and the EU and a spike in unemployment.
“The latest forecast also notes that, even if further virus outbreaks are contained and major restrictions on economic activity are avoided, consumers and businesses could remain cautious in their behaviour for an extended period,” the report mentioned.
The Club’s estimates assume a easy free commerce settlement with the EU by the tip of the yr.
Without an settlement, development of 4.8% is forecast in 2021, down from 6%, whereas development in 2022 can be lower to 2.6% from 2.9%.