–UK 2012 Growth Forecast Cut To 0.9% Vs November’s 1.2% Estimate

LONDON (MNI) – The Confederation of British Industry has cut its
growth forecast for the UK economy this year to 0.9% from the 1.2%
estimate it issued in November.

The CBI forecasts growth will accelerate to 2.0% in 2013. The O.9%
forecast is bang-in-line with the Bank of England’s projection in its
November Inflation Report and above consensus, with the average
independent forecast in the Treasury’s latest survey just 0.4%.

The CBI noted Q4’s 0.2% fall in growth but it expects the UK to
avoid a technical recession, that is two consecutive quarters of
negative growth.

“While the level of uncertainty around the economic outlook is
high, we think it likely that growth will restart in early 2012,” the
CBI said.

It added that growth was set to be fragile and subdued over the
first two quarters of the year before picking up pace in H2.

Quarter-on-quarter growth will remain fragile in the first two
quarters of this year (0.2%, 0.2%), improving modestly in the second
half of the year (0.6%, 0.5%), as inflationary pressures ease, the CBI
said.

The latest forecasts show inflation falling back towards target
levels (2.2%) in the fourth quarter of 2012 and then remaining close to
the BOE’s 2.0% target throughout 2013.

The CBI said that this would relieve some of the pressure on
household incomes, with consumer spending picking up slightly in the
second half of this year.

Household consumption, however, will be under pressure from modest
wage growth and continuing high unemployment, which is likely to peak at
2.9 million in the first quarter of 2013.

Trade and business investment are set to be the big drivers of
growth, with export growth of 4.3% and 6.4% expected in 2012 and 2013
respectively. Total business investment of 4.3% is forecast for 2012 and
5.0% for next year.

Ian McCafferty, CBI Chief Economic Adviser, said “After a
particularly difficult autumn which saw a contraction in growth in the
fourth quarter, recent business survey data in manufacturing and
professional services, has been more encouraging with an uptick in
activity and improved business sentiment.

The CBI also said that it detected “tentative signs of a
stabilisation in economic activity in the ‘core’ countries of the zone,
which account for a large proportion of UK exports”.

–London bureau: 44 20 7 862 7492; email: ukeditorial@marketnews.com

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