Britain 'will grow faster than US, eurozone and Japan'

Goldman Sachs believes Britain will bounce back stronger than other world markets next year, after second quarter growth of 1.1% David Smith Published: 1 August 2010 Recommend (0) British growth has been better than predicted, and unemployment remains low (Paul Vicente)Britain will enjoy a stronger recovery next year than the US, the eurozone and other advanced economies, despite the government’s tax rises and spending cuts, according to forecasts from Goldman Sachs. The investment bank predicts growth of 2.9% for Britain next year, followed by 3.2% in 2012. It says America will grow by 2.4% next year, Japan by 1.7% and the eurozone by 2.2%. Typically, the American economy enjoys a stronger upturn than Britain. One difference in the recent recession was that unemployment rose much more in America than in Britain. Figures released on Friday showed the US economy grew at an annualised rate of 2.4% in the second quarter, down from 3.7% in the first. Measured in the same way as Britain’s data, it was 0.6%, barely half Britain’s second-quarter expansion of 1.1%. Research by Goldman’s economists was influential in persuading the chancellor’s advisers that early cuts in public spending would not harm the recovery and the economy could continue to grow in the face of tax rises and spending reductions. The bank remains upbeat about the global economy, which it predicts will grow 4.7% this year and 4.8% in 2011, buoyed by 10% growth in both years in China. Its positive outlook is supported by the Baltic dry index, which measures freight rates for shipping dry commodities and is used by some economists as a lead indicator for the global economy. Its sharp fall in recent months has led to predictions of a “double-dip”. However, on Friday the index rose for the 11th day in a row, taking it up nearly 16% from its lows, though it remains well below its spring peak. The Bank of England’s monetary policy committee is expected to leave Bank rate unchanged at 0.5%

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