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May 04, 2012

CBI predicts return to growth in 2012 for UK economy

The UK economy will see growth resume in the second half of 2012, with faster GDP growth during 2013, according to the latest quarterly CBI economic forecast.

The CBI now expects GDP growth in 2012 to be 0.6%, down from the 0.9% growth forecast made in February. The figures have been revised as a “direct consequence” of the preliminary ONS figure for quarter one. In the longer term, however, the CBI forecasts GDP growth for 2013 to be 2%.

Quarter-on-quarter growth is expected to be flat in the second quarter of 2012 (0%). However, the CBI says there will be an improvement in the second half of the year (0.7%, 0.5%), citing an improving global economy, an expected easing in inflationary pressures, a boost from the Olympics and a bounce back from the second quarter.

The CBI also predicts that:

  • Inflation will be slightly higher than previously thought throughout 2012, but it should come close to hitting the Bank of England’s target in the spring of 2013.
  • Household spending will remain subdued, with weak wage growth and unemployment rising to a peak of 2.86 million in the first quarter of 2013.
  • There will be a modest rise in business investment, growing at around 4% in 2012 and 5% in 2013.
  • Exports are forecast to rise this year (1.5%) and are expected to increase by around 6% in 2013.

Commenting on the forecast, CBI Director-General, John Cridland said: “Despite the disappointing GDP estimate for the first quarter from the ONS, we still think the UK economy will grow in 2012, with faster growth next year. Optimism among businesses has been increasing since the turn of the year, with manufacturing demand holding up. And that is beginning to translate into more jobs and investment.

“That said, the global economy continues to pose a number of significant challenges. Concerns over Eurozone stability are on the rise again, oil prices remain high and confidence among businesses and households are still fragile.

“We have always said that the path back to sustainable economic growth will be a long and difficult one, with many bumps along the way. To re-balance our economy towards exports and investment will take time and patience.”