The recent pick-up in the growth rate of underlying retail sales suggests that we are finally seeing a strengthening in domestic demand. It may well be sustained too. Coming out of the recession, the lingering effects of the financial crisis and the ongoing housing downturn initially held back economic growth between 2010 and 2012. The euro-zone sovereign debt crisis didn't help either. Just as those effects began to fade, a massive fiscal drag hit growth at the end of last year and over the first six months of this year. But even that fiscal drag is now easing, which helps to explain why domestic demand growth now appears to be accelerating. Under those circumstances, we expect GDP growth to accelerate from 1.8% this year to around 2.5% in 2014 and 3.0% in 2015.
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