Weaker consumer demand and rising commodity costs will make growth in 2009 the slowest since 1992 according to the CBI
Next year’s UK GDP growth will be the slowest for 17 years, according to the Confederation of British Industry’s latest forecasts. The higher cost of commodities and record oil prices, plus the slowdown in consumer spending are to blame, says the CBI.
The forecast for GDP growth in 2009 has been lowered by 0.4% to 1.3%, although that the forecast for growth in 2008 is 1.7%, down only 0.1% on March’s forecast.
At the same time, the CBI predicts that the CPI rate of inflation will exceed 3% for the remainder of 2008, peaking at 3.8% in the third quarter. It is likely to remain above 3% until the end of the first quarter of 2009.
However, the CBI believe that inflation is likely to fall later this year and will continue to do so throughout 2009 – helped by a slowing economy, the fading impact of high oil prices and expected wage restraint.
Richard Lambert, the CBI’s Director-General said: “Over the past year, the CBI has consistently had to revise down its forecasts for economic growth. The main reason is that the oil price – measured in depreciated sterling – has continued to rise strongly, roughly doubling since the spring of 2007. This has squeezed household incomes and companies’ profit margins, and has also made it much harder for the Bank of England to cut interest rates in the face of the economic slowdown.
“Our best bet is still that there will be a measure of economic growth in 2009. But the outlook has deteriorated in recent months, and considerable uncertainties remain.”
However, he stressed that this is not a forecast for recession.
“These days, firms are leaner and more efficient and our economy’s reach is far more global. We should avoid believing a recession is inevitable, or talk ourselves into unnecessary trouble.”