CBI revises UK growth prospects

| August 1, 2011
”CBI

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

The employer’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 – 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: “We will continue to make headway, but the rest of the year is going to be tougher than we previously thought.

“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.”

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 “critical juncture”.

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, today’s forecast comes after it was revealed UK manufacturing contracted in July – 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 today’s figures will raise fears about the strength of the economic recovery.

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