Consumer spending is increasing, according to the research by the Confederation of British Industry (CBI) after a lengthy recession, and businesses are getting more positive about expansion.
Andrew Sentance, a former member of the Bank of England’s Monetary policy committee (MPC) is hopeful that it’s not too long before it’s time to raise rates of interest when growth speeds up.
Bars, restaurants and restaurants, as well as hotels, saw sales increase sharply during the months leading up to May, registering their highest growth in the last three months since July 2007, as the CBI’s report shows.
Sales that increased beat those with lower the sales of 10 percent during the period. These strong numbers boosted profits – a net ratio of 21 percent was reported as an increase in the quarter, the highest performance ever since the beginning of November.
Companies are now anticipating that the growth rate will increase with a 30% of consumers services is positive.
Professional service firms are also optimistic with a current balance of 29 percent currently optimistic – the best level since February 2010 and 21 per cent anticipating sales to rise over the next three months. A majority of 21 percent expect to recruit more employees.
But he’s wary about declaring a complete growth.
While PwC economics Andrew Sentance said a rise in rates in the near future could be needed in the wake of economic recovery, and it could boost and not slow the recovery of the UK economy.
“There is a lot of discussion about problems for borrowers, but the longer these very low interest rates go on the worse things get for savers who are squeezed and adjust their spending down,” saying “The arguments are not just one-way.”
He added that it is essential that for the Bank of England prepares the basis for a rate rise in order to ensure that businesses and households aren’t unprepared and with no money to pay for their borrowing when rates rise.
“If we are going to get rates up from these levels it needs to be a gradual process – the MPC cannot leave it until the conditions are right for higher rates and then suddenly raise them a lot,” the official said.