As oil prices collapse, UK growth is revised upwards

Britain is benefitting from tumbling oil prices, which have made a considerable contribution to keeping inflation low, according to economic forecaster the EY Item Club.

As oil prices have fallen, consumers have been left with more disposable income and the Item Club now expects to see a rise in GDP of 2.9%, up from previous estimates of 2.4%.

This has been “a shot in the spending arm” for British consumers, the forecaster said.

Lower oil prices are already having an impact on prices at the petrol pumps.

Britons have also benefitted from an intense price war between the leading supermarkets that saw supermarket prices fall by 1.9% in the year to December, according to the Office for National Statistics.

EY Item Club chief economic adviser Peter Spencer said: “The UK consumer has been lashed by rising fuel and food prices for so long, but is now the major beneficiary as these pull back. Individuals can look forward to a substantial increase in real earnings.”

Meanwhile, growth across the Eurozone has flat-lined and has possibly slipped into deflation.

Measures to introduce a new round of quantitative easing from the European Central Bank are expected to be announced this week.

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