UK economy expected to have strong autumn, reveals report

The UK economy is set to perform well over the coming autumn, according to a new report from the Confederation of British Industry.

A strong end to the year will come after the economy picked up over the spring and summer, with growth having increased from 0.4% in the first quarter to 0.7% in the second.

Factors

The CBI has noted that the improvements come in spite of the meltdown in the Chinese economy and subsequent volatility in the global financial markets.

Strong exports figures and levels of business investments are the main factors behind the positive outlook.

However, CBI director of economics Rain Newton-Smith expressed some caution when he said: "While the overall domestic picture is looking bright, exporters face a challenge, especially in light of a weaker outlook for global growth and the strength of sterling making them less competitive."

Weak demand

Separate reports that are due expect to show that the country is experiencing a ‘two-speed’ economic recovery, with the service sector booming but manufacturing industries struggling.

Weak demand for UK goods from abroad is affecting exports, with a marked drop in August's figures from the month before. Analysts at Investec believe the purchasing managers’ index dropped from 51.9 in July to 51.7 in August, although scores above 50 indicate growth.

However, the services PMI to be published soon is expected to have risen from 57.4 to 57.7.

Philip Shaw, an economist at Investec, commented: "We are expecting continued signs of a two speed economy with services edging higher and manufacturing slipping."