The UK economy is expected to narrowly avoid recession in 2012, according to forecasts from the European Commission. GDP growth is projected to be 0.1% in the each of the first two quarters of 2012. There will then be a “modest pick-up in growth”, aided by the Olympics, to give annual GDP growth of 0.6% in 2012. The EC’s Interim Forecast report says: “Since the beginning of 2012, UK coincident and leading indicators have improved significantly. Rising unemployment will hold back private consumption growth, especially early in the year, and nominal wage growth is likely to remain subdued. “A sustained fall in inflation should however lessen the squeeze on real disposable incomes and allow private consumption to stabilise in the second half of the year. “Tight credit conditions are also expected to constrain internal demand. Nonetheless, investment is expected to start increasing in the second half of 2012, from a low base.” Inflation is expected to “fall rapidly” in 2012 to 2.7%, after having reached a peak of 5.2% in September 2011. “The latest figures show a drop to 3.6% in January, which should continue during the first quarter. “The fall in inflation should be sustained throughout the year due to subdued internal demand and price stability in energy, oil and other categories. The large upward pressure that energy prices placed on inflation in 2011 has now subsided.”