Updated: Mon, 13 May 2013 10:18:19 GMT | By pa.press.net

King in inflation 'parting gift'

Chancellor George Osborne is expected to receive a "parting present" from outgoing Bank of England governor Sir Mervyn King this week with an improved forecast in his quarterly report on inflation.


Mervyn King's presentation of the quarterly inflation report is his last before he is succeeded by Mark Carney in July

Mervyn King's presentation of the quarterly inflation report is his last before he is succeeded by Mark Carney in July

Chancellor George Osborne is expected to receive a "parting present" from outgoing Bank of England governor Sir Mervyn King this week with an improved forecast in his quarterly report on inflation.

Economists expect the Bank's outlook for the rate could be revised downwards on the back of a slide in oil and commodity prices, while expectations for gross domestic product (GDP) growth are unlikely to be downgraded.

It comes amid glimmers of hope for an upturn in the UK's fortunes and the publication of data that showed the "double dip" recession may never have happened.

Sir Mervyn's presentation of the quarterly inflation report is his last before he is succeeded by Mark Carney in July. It is expected that inflation, though still rising, will now be forecast to peak at a lower level than previously feared.

Elsewhere, recent encouraging data has shown the beleaguered construction and manufacturing sectors on the verge of turnarounds while services continued to power ahead.

Figures from the Office for National Statistics (ONS) last month showed the UK avoided a triple-dip recession, with 0.3% GDP growth for the first quarter of the year. Last week it emerged that even the second dip in 2011/12- which economists had for some time pointed out was only marginal - may never have happened, after construction sector data from the first quarter of 2012 was revised by the ONS to show it did not fare quite as badly as previously thought.

Howard Archer, UK economist at IHS Global Insight, said: "Outgoing governor Sir Mervyn King could actually have the parting present of being able to deliver a rare report that does not contain higher consumer price inflation forecasts or lower GDP growth projections compared to the previous report.

"Indeed, Sir Mervyn may even be able to present a marginal downward revision to the consumer price forecasts although having higher growth forecasts may be pushing his luck."

Fears that inflation would reach a peak of nearly 3.5% in the summer should be put aside, with a lower peak of 3.0% instead forecast, he added. He said that while the economy remained vulnerable and "far from buoyant", there are signs that it had a good start to the second quarter and IHS is raising its forecast for UK growth in 2013 from 0.7% to 0.9%.

However, other figures out this week could show unemployment rising again and continued weak growth in average earnings.

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