OFFICIAL figures, due on Monday, are expected to show that the economy
grew by around 0.5% in the first quarter of the year, equivalent to an
annualised rate of over 2%.
Two months of rising manufacturing output have prompted independent
economists to upgrade their forecasts for economic growth this year.
Assuming that the pundits are in the right ball park about the first
quarter, Chancellor Lamont's Budget-time forecast of 1.25% growth for
the year as a whole is looking increasingly dated, though it is barely a
month old.
But the strongest indications of economic recovery have only emerged
this month. Nevertheless the Chancellor, who may have been deliberately
cautious because of past criticisms of over-optimism at the Treasury,
now finds the old roles reversed with the ''teenage scribblers'' in the
City, much derided by his predecessor, Nigel Lawson, signalling a
stronger recovery than he has forecast.
James Capel's Adam Cole points out that first-quarter growth in gross
domestic product of 0.5% or more would translate into 1% growth for the
year as a whole, even if the economy got stuck in a rut for the rest of
the year.
Capel has not yet upgraded its forecast of 1.7% for 1993 growth,
though it may do so as new information is published on the econony. A
few weeks ago 1.7% was at the upper end of City expectations, but now it
is beginning to represent the consensus.
Midland Global Markets' chief economist, Roger Bootle, who was at one
time so gloomy about the economy ever staging a decent recovery that he
urged Lamont to cut interest rates to 3%, is typical of those upgrading
their forecasts. Within a fortnight his expectation of economic growth
has moved from 0.5% to 1% and then to 1.5%.
Kevin Gardiner at Warburg Securities has raised his forecast from 1.5%
to 1.7% for the current year. Next year he is looking for 2.9% instead
of the 2.6% he previously forecast.
Bill Martin at UBS Global Research has upgraded his 1993 forecast from
0.25% to 1.25% and expects nearly 3% from 1994, though he has serious
doubts about Britain being able to sustain robust growth ''without
hitting one of two familiar brick walls, one labelled inflation, the
other an explosive trade deficit''.
Smith New Court expects to upgrade its 1993 forecast from 1.4%. ''So
many of the lead economic indicators are showing quite strong activity.
The upturn in the first months of the year looks set to continue this
year,'' said the stockbroking firm's Andrew Milligan.
Some economists have even set their sights on 2% growth this year. ''I
expect 1.8% growth this year and when the economic figures finally come
through growth could well be as high as 2%,'' said Charterhouse Tilney's
Richard Jeffrey, a long-standing optimist on recovery prospects.
The most bullish forecast for 1994 is Kleinwort Benson's 3.4%, well
above trend growth of around 2.5%.
* THE green pound has been revalued by 0.8% against the Ecu in
response to sterling's recent recovery on foreign exchange markets. Most
agricultural support prices will be reduced by the same amount.As a
result food price inflation, which has been pushing the underlying
inflation rate up towards the 4% upper limit of the Treasury's target
range, should recede slightly.
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