CBI increases growth forecast
THE CBI has increased its forecast for UK economic growth for 2013 from 1% to 1.2%, as the recovery begins to gather some short-term momentum.
The business lobbying organisation has also increased its forecast growth for 2014, forecasting 2.3% GDP growth up from 2%. The CBI expects the economy to gather pace as disposable income increases and business and housing investment support domestic demand.
Forecasted growth in 2013 comes after a better than expected second quarter and signs of a pick-up in confidence across a broad range of sectors, including services, construction and manufacturing.
The CBI said a return to growth in the Euro area and broader global recovery will give a positive boost to exports, but imports will also grow as the UK’s domestic situation improves, so the trade contribution to growth will remain small. It said the Bank’s forward guidance should add to the recovery in business and consumer confidence.
John Cridland, CBI director-general, said: “The economy has started to gain momentum and confidence is picking up, but it’s still early days.
“We need to see a full-blown rebalancing of our economy, with stronger business investment and trade before we can call a sustainable recovery.
“We hope that will begin to emerge next year, as the Eurozone starts growing again.
“The Government needs to get behind talented UK businesses to help them break into new export markets and sell great British products and services around the globe.”
The CBI said household spending is expected to slowly strengthen in the second half of 2013 and through 2014, as confidence lifts and credit conditions continue to improve. This will be increasingly supported by improving spending power as inflation gradually falls back and disposable income picks up, against the backdrop of a stable labour market.
Meanwhile, business investment and exports are forecast to strengthen as the global economy picks up and the Eurozone returns to growth, confidence rises, and credit conditions continue to improve.
Business investment is forecast to grow by 7.3% in 2014 from -2.8% in 2013. Export growth is expected to increase from 0.7% in 2013 to 4.9% in 2014, but the net contribution of trade to GDP growth will remain muted as domestic demand boosts import growth from -0.8% in 2013 to 4.4% in 2014.
