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British Economy Likely To Return To Growth In Q1: IHS Global Insight

The British economy is likely to return to growth in the first quarter, Howard Archer, chief UK and European economist at IHS Global Insight, said in a note Wednesday.

The firm expects UK's gross domestic product to rise around 0.3 percent sequentially in the first quarter. It, however, warned that economic activity may be muted overall and prone to relapses over the next few months, at least before growth hopefully picks up on a more sustainable basis in the second half supported by the reduced squeeze on consumers' purchasing power, improving global growth and a favorable monetary policy.

In the whole of 2012, GDP growth is estimated to quicken modestly to 0.8 percent from last year's 0.7 percent, and to further expand by 1.6 percent in 2013.

IHS Global Insight said it continues to expect the Bank of England to engage in additional quantitative easing (QE) this year, given likely erratic and still muted overall economic activity in the near term at least. The central bank is likely to raise the size of its QE by adding a final GBP25 billion either in May or in the third quarter. The bank, however, will hold interest rates at the current levels at least until late 2013, the firm said.

Final data released by the Office for National Statistics today showed that the British economy shrunk 0.3 percent sequentially in the fourth quarter, faster than the 0.2 percent contraction initially estimated, mainly reflecting a slump in business investment and substantially reduced stock-building.

On the positive side, consumer spending returning to growth during the quarter, and exports remained relatively strong despite the contraction in the Eurozone.

by RTT Staff Writer

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