CBI predicts slow growth in 2011

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The UK economy will slowly emerge from the recession in 2011, but growth will be patchy and slow, according to the CBI’s latest economic forecast.

Despite a squeeze on household income, and public spending cuts, the CBI expects this year’s GDP growth rate to be 1.7%, marginally lower than the previous forecast of 1.8%. Growth of 2.2% is expected in 2012, down slightly from February’s forecast of 2.3%.

Stronger net exports are expected to make an important contribution to the UK economy both this year and next. Business investment is also expected to help drive economic growth.

The CBI’s forecast for the remainder of 2011 is broadly unchanged, with steady but modest growth of 0.6% expected over each of the three remaining quarters. Inflation is anticipated to be higher throughout this year and into early 2012 than previously forecast, largely due to the effect of higher commodity prices, oil in particular.

Unemployment is expected to peak in Q4 2011, at 2.62 million. And while it will remain stubbornly high next year, it will fall back to 2.52 million by Q4 2012.

John Cridland, CBI director-general, commented: “We continue to expect that the recovery will make further headway this year and next, but the pace will be sluggish. The economy is battling headwinds of squeezed household budgets, weak wage growth, high inflation, and necessary public spending cuts. Concerns also remain over the volatility of oil prices, and the impact of the earthquake in Japan on UK supply chains.

“But there are some brighter spots in the forecast. Global economic conditions remain upbeat, and we expect to see a stronger performance by UK exporters. Business investment will also make a firm contribution to growth in 2011 and 2012.”

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