UK economic growth will accelerate in the second half of 2006, according to a survey of business confidence.
The survey suggests UK consumer confidence is improving
Economic growth will rise to 3.4% in both the third and four quarters of 2006, compared with 2.4% last year, said accountants BDO Stoy Hayward.
Its latest Business Trends Report also showed that firms expect inflation to come in at 2.2% in the second half of 2006, above the Treasury's 2% target.
As a result, it predicts interest rates will not be lowered this year.
UK rates are currently at 4.5%, where they have been for eight months in a row.
Increased consumer spending
BDO Stoy Hayward said the main factors contributing to higher business confidence were a rebound in consumer spending, an economic recovery in continental Europe, and a rapidly rising stock market.
"Short-term [business] confidence has risen to its highest level in over two years, and it is good to see that medium-term confidence has stabilised at its highest point since last April," said BDO Stoy Hayward partner Peter Hemington.
"Businesses are responding by planning for better times ahead - stocks are being built up and capital expenditure looks set to rise in the coming months."
The survey said that the service sector was leading the ongoing economic growth, but that manufacturing was also seeing a "respectable" increase in output.