CBI revises UK growth prospects

| August 1, 2011

The Confederation of British Industry (CBI) has today revised its growth prospects for the UK Economy.

The employera��s group is now forecasting growth of 1.3% this year, down from its May forecast of 1.7%.

Meanwhile, it is still expecting growth of 2.2% in 2012 a�� unchanged from its previous forecast.

The CBI has also suggested the Bank of England will keep interest rates at the record low of 0.5% until the first quarter of 2012 with rates hitting a level of 1.5% by the end of next year.

Commenting on its revised forecast, CBI Director-General John Cridland told reporters in London on July 29: a�?We will continue to make headway, but the rest of the year is going to be tougher than we previously thought.

a�?Looking ahead to 2012, we still see scope for the economy to be on a somewhat firmer footing, but the overall picture is undoubtedly subdued.a�?

Meanwhile, in comparison, the Ernst & Young ITEM Club recently lowered its growth forecast for the UK economy after warning that the UK is at a a�?critical juncturea�?.

The ITEM Club now believes the UK economy will expand by 1.4% this year, down from an earlier estimate of 1.8%.

It is also predicting growth of 2.2% for the 2012 year.

The Chartered Institute of Personnel and Development (CIPD) recently revised its growth forecasts to 1.4% for the 2011 year, down from its previous estimate of 1.6%.

The International Monetary Fund believes the UK economy would grow by 1.5% this year, while the British Chambers of Commerce expects growth of 1.3%.

The Organisation for Economic Cooperation and Development is estimating 1.4% but there is a more optimistic 1.7% from the Office of Budget Responsibility (OBR).

Meanwhile, todaya��s forecast comes after it was revealed UK manufacturing contracted in July a�� the first time since the UK was in recession two years ago.

The closely-watched CIPS/Markit manufacturing PMI fell to 49.1 last month from a revised 51.4 in June.

The index is now below the crucial 50 mark, which separates contraction from expansion.

The manufacturing sector, which accounts for around 13% of economic output, has been one of the bright spots in the UK economy but todaya��s figures will raise fears about the strength of the economic recovery.

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