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Economic output increase fastest in six years

UK ECONOMIC output has grown in the latest three months at the fastest pace since late 2007, the Confederation of British Industry has calculated.

The CBI's finding that growth in the volume of output has been strong in the three months to January is based on a new composite indicator based on its surveys of the manufacturing, retail, and services sectors.

The business organisation also concludes, taking these surveys together, that the outlook for the coming three months is "buoyant".

The new CBI Growth Indicator, published today, comes ahead of this morning's release of the latest official UK gross domestic product data for the fourth quarter of last year.

Economists are forecasting GDP will have grown by 0.7% in the final three months of 2013, after expansion of 0.8% in each of the preceding two quarters. Their predictions range from 0.3% to 0.9%, according to a survey by Reuters.

The CBI's new composite indicator is aimed at offering an early perspective on growth. It covers close to 75% of the private sector economy, the CBI noted.

The business organisation said its indicator for the three months to January reflected recent strong performances by the business and professional services, consumer and distribution sectors. It added that the manufacturing sector had posted decent growth.

The CBI calculated that the indicator was, when compared with its historical survey results, the strongest since September 2007.

Katja Hall, CBI chief policy director, said: "A picture is unfolding of a real upsurge in output across much of the UK economy.

"Many firms in many sectors are feeling brighter about their prospects than they have for a long time, showing the recovery is gaining traction."

She added: "We certainly need companies investing more and creating a bigger footprint in fast-growing markets, and, while some risks remain, we expect the economy to continue to strengthen through 2014."

The CBI was upbeat about the recent performance of the UK, which unlike other major economies such as the US and Germany is still adrift of its peak in output ahead of the recession of 2008/09. The business organisation was also optimistic about the outlook.

The CBI said: "The UK economy picked up steam in 2013 and now seems likely to deliver GDP growth of close to 2% for the year as a whole, which would be the strongest since 2007. Further improvements in credit conditions, rising global momentum and the receding of extreme risks fed through to rising consumer spending and business confidence in 2013."

It added: "As 2014 gets under way, this rising confidence, alongside supportive monetary conditions and a broad-based recovery, is expected to support business investment and the labour market in particular, with productivity and earnings expected to rise."

Howard Archer, chief UK economist at consultancy IHS Global Insight, is projecting the UK economy will have grown by 0.7% in the final quarter of 2013. This, he noted, would result in growth of 1.9% over 2013 as a whole, an improvement on growth of 0.3% in 2012. But, he noted, even with growth of 0.7% in the final three months of 2013, GDP in the fourth quarter would be 1.3% adrift of its peak in the opening quarter of 2008.

A survey by YouGov and banking giant Citi yesterday showed the UK public's expectation of annual consumer prices index inflation over the coming 12 months had fallen to the lowest level since mid-2012, dropping to 2.4% from 2.6% in the December poll. This was viewed as giving the Bank of England further scope to keep holding base rates at a record low of 0.5%.

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