Signs of uplift in UK economy

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A BUSY week of economic releases should provide some cheer to markets as indicators show the outlook for the UK is improving.

Official data is likely to confirm that the UK economy contracted by 0.2 per cent in the final three months of last year, but a breakdown of the figures is expected to show that consumer spending held up well.

Howard Archer, chief UK and European economist at IHS Global Insight, said fourth-quarter output was probably dragged down by a sharp decline in industrial production and a more modest drop in construction. He expects activity in the dominant service sector to have been flat.

Archer expects the CBI’s industrial trends survey for February, published on Thursday, will indicate that manufacturing activity is now picking up, albeit modestly.

He said: “We now believe that the UK will achieve modest growth in the first quarter, although we still expect the economy to be essentially flat over the first half of the year before sustainable, modest growth gets under way in the second half.”

Public finances should have received a boost from the rush to meet the 31 January tax deadline.

Last year there was a net repayment of £5.2 billion in the traditionally strongest month for tax receipts, and the figure could be around £8bn this year. That should put Chancellor George on track to beat public borrowing targets, although doubts remain about the prospects for further reductions for the coming financial year.