According to the latest BDO Business Report the service sector is powering ahead while average earnings figures show wage growth running at 2% ahead of inflaction.
Put together with spending increases and a strong housing market they combine to put enormous pressure on the Bank to raise interest rates from their current level of 6%.
Charles Maynard, BDO Stoy Hayward partner said: ‘The MPC may have passed on increasing rates last month but all the evidence pointing for a small rate rise is still there.
‘Interest rates are likely to go up further, but continuing low inflation and a strong but moderate outlook for growth mean that rates may not have to go as high as the 7.5% peak that they reached in 1998, which is good news for the manufacturing sector, it is needed to keep the domestic economy in check.’
The BDO report found that in general optimism has decreased slightly with confidence growing fastest in the service sector. Output is up slightly and the prediction is that GDP growth will be running at 2.6% during the third quarter of this year.
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