UK set for stronger growth than previously expected, should exceed its January 2008 peak size in next few months, reports National Institute of Economic and Social Research, which expects UK economy to grow 2.9% this year, up from 2.5% February forecast

Cindy Allen

LONDON , May 9, 2014 (Thomson Reuters Corp.) – Britain's economy will grow faster than previously expected this year and should exceed its January 2008 peak size in the next few months, a leading economic research body said on Friday.

The National Institute of Economic and Social Research (NIESR) expects the economy to grow 2.9 percent this year, raising its forecast from 2.5 percent in February.

It also upped its prediction for 2015 growth to 2.4 percent from 2.1 percent in February. It sees growth staying at around 2.4 percent in 2016 and 2017.

Jack Meaning, research fellow at the institute, said it had revised up its forecasts because of strong growth in the first quarter of this year, a pick-up in consumption and an improvement in the investment outlook.

Britain's economy saw faster than expected growth last year, buoyed by low interest rates, subdued inflation and a strong housing market.

The rate at which house prices in Britain are rising has begun to worry some Bank of England officials, who are coming under pressure to act to avoid a property bubble.

Recent data showed the housing market lost some steam in April, but house prices remained at high levels.

Low interest rates and government-sponsored schemes have fuelled a strong recovery in the housing market since a slump during the 2008-2009 financial crisis, with a shortage in the supply of new homes adding to the price pressures.

A separate report from the National House Building Council (NHBC) provided some reassurance, showing a 7 percent rise in the amount of new homes registered in Britain in the first quarter of 2014 compared with a year ago.

Registrations of new homes in London, where the property market has led the national recovery, were up 6 percent in the first quarter of this year versus a year ago, after a strong 2013.

"Our new figures show further sustained growth and consolidation in the UK house building industry following a strong year last year," said Mike Quinton, NHBC chief executive.

But he added: "The UK still has a chronic shortage of new homes so we must not get complacent in our continued attempts to meet the growing housing needs of the population."

(Reporting by Ana Nicolaci da Costa; Editing by Hugh Lawson)

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