UK economy to grow at a decent pace in the coming quarters

The UK economy is expected to grow at a decent pace in the coming quarters. Growth is expected to be driven mainly by domestic demand and, in particular, by private consumption. Private consumption is supported by a combination of higher employment, positive real wage growth for the first time since 2009 and high consumer confidence. 

The unemployment rate is already more or less back to 'normal' and the labour market will tighten further going forward, which would lead to even higher wage growth. The UK was back in deflation in September as CPI inflation declined to -0.1% y/y, from 0.0% y/y in August. 

"Unless we see a further drop in commodity prices, we think inflation hit the bottom in September and we expect CPI inflation to pick up close to 1% in January 2016, when the base effects from the drop in oil prices in H2 14 begin to drop out", notes Danske Bank.