Member Article

Economy is “flat” not “falling” according to CBI

Figures from CBI say that the UK economy should be on the way to recovery by the end of 2012.

Business growth remains uncertain for the next year and CBI expects modest expansion of around 5% for the remainder of 2012, and 3.8% in 2013.

Predictions set in May for GDP growth this year were +0.6%, whereas current forecasts set this figure at -0.3%.

Expectations were undercut by the figures announced today, however CBI has said there will be improvement in the latter half of the year after a “bounce-back from the Jubilee effect”, as well as a fall in inflation effecting figures.

The economic climate over the summer has caused retailers to heavily discount goods, and combined with a slump in global commodity prices, this had led to dramatic drops in inflations rates.

John Cridland, CBI Director-General, said: “At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year.

“Underlying growth will return to the economy later in the year than previously expected, with a somewhat better outlook next year.

“However, euro area uncertainty, and the looming “fiscal cliff” of spending cuts and tax increases in the US will only add to the sense of unease during the coming months.”

Anna Leach, CBI Head of Economic Analysis, commented: “While we expect GDP to rise in Q3 as the Jubilee effect unwinds, our survey data indicate that underlying conditions are close to flat, so the economy is likely to remain quite listless through the remaining months of 2012.

“On a more positive note, we expect the pressure on household incomes to continue to lift through the remainder of this year, as inflation falls further, and this should put the recovery on a slightly firmer footing next year.”

Improvements predicted for 2013 should lead to greater disposable incomes for individuals which are set to rise for the first time since 2010.

Although unemployment levels may not improve as significantly as CBI first thought, rates should peak to 2.7m by the middle of next year.

This was posted in Bdaily's Members' News section by Miranda Dobson .