OECD RAISES UK GROWTH FORECAST FOR THIS YEAR TO 1.1%

The Organisation for Economic Co-operation and Development has raised its UK growth forecast for this year to 1.1 per cent, up from 0.9 per cent in June. It expects growth to slow to 1 per cent in 2027, down from the 1.1 per cent previously forecast. The organisation said the economy performed better than expected in the second quarter, citing solid domestic demand amid the conflict in the Middle East. Household spending could get a boost from government measures to cut energy bill taxes and cap bus fares.

The estimate ranks second-highest among G7 economies this year, behind the United States on 2.2 per cent and level with Germany. The OECD lowered its inflation forecast for this year to an average of 3.1 per cent; one account put the previous forecast at 3.7 per cent, while another cited 3.6 per cent. It forecast inflation of 2.6 per cent next year, up from 2.4 per cent forecast in the summer. Global oil prices have risen to between 90 and 100 dollars a barrel since August, with UK consumers spending more on fuel as petrol and diesel prices rose since the conflict began, the OECD said.

The OECD expects no change this year to UK interest rates, which stand at 3.75 per cent, though higher borrowing costs are likely to weigh on activity over the next year. Emma Reynolds, chief secretary to the Treasury, said the economy was showing "strong resilience" amid pressures from conflicts in the Middle East and in Europe. She said the UK had recorded the fastest growth in the G7 in the first half of the year. Economists have warned that higher oil and gas prices could squeeze household spending this winter.