Responding to today’s GDP figures which showed the economy expanded by 0.7% in the second quarter of 2015, James Sproule, Chief Economist at the Institute of Directors, said:
“It is encouraging to see another set of good, solid growth figures. The fact that GDP per capita may be back to its pre-crisis peak is particularly welcome news in terms of living standards and marks the latest milestone in what has been a business-led recovery. After years when preserving jobs was rightly the priority, higher wages justified by corporate performance are giving us sustainable GDP growth and an economy on the right road.
“With such high levels of both public and private debt, growth after the crisis was always going to be slower than the unsustainable boom years of the early 2000s, when quarterly growth at times topped one per cent. Growth of 0.7 per cent is impressive, but not fast enough to raise concerns that the economy may be overheating. With the economy on more stable footing than it has been for many years, consumers and business should use this opportunity to consolidate and pay down their debts.
“The Bank of England must now look closely at its interest rate policy. This is the latest piece of evidence which suggests the time to start normalising interest rates is now. An economy growing at 0.7 per cent per quarter, unemployment at just 5.6 per cent and real wage growth of more than three per cent has no need for historically low interest rates of 0.5 per cent. The IoD continues to call on the Bank of England to start the gradual process of normalising rates as soon as possible. We would like to see the Monetary Policy Committee vote for a 25 basis point increase when they meet next week.”