PBR 2007: Official growth forecasts trimmed, but chancellor still optimistic

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Insistence that the economy will grow by 3% this year, and faith in the budgets later-year forecasts, soften the blow of conceding that growth could drop below the 2.5% trend in 2008.

The economys growth rate stayed at 3% y-o-y in H1, in line with recent trends and Treasury forecasts. Although most forecasters expect H2 growth to be slower, the Chancellor has kept his full-year projection at 3%. This enables Darling to repeat his predecessors much-loved refrain that the UK is outgrowing most other large EU economies, and even set to move ahead of the US for full-year 2007. Consumer spending growth has already slowed, to 2.5% this year and around 2% in 2008-9 on independent forecasts, as a result of higher interest rates and slow real wage growth. But business investment has picked up to avo...

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