CBI boosts GDP forecasts after growth shock

 
Ben Southwood
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THE UK ECONOMY will stay flat overall through 2012, the Confederation of British Industry (CBI) forecasted today, upping its outlook based on better-than-expected GDP data out last week.

The UK economy will be in roughly the same position it was at the end of 2011, overall through 2012, according to CBI forecasts out today, up from the minus 0.3 per cent predicted at the beginning of August.

This improvement in its forecast is down to the better-than-expected GDP growth of one per cent seen in the third quarter, the prominent business lobby said, otherwise the economy is still subject to most of the same pressures it was subject to earlier in the year.

Other than the improvement to a flat overall prediction, the forecasts won’t make particularly pleasant reading for chancellor George Osborne: the government won’t manage to shrink its consumption at all in 2012, instead increasing it 2.1 per cent, while manufacturing output will have shrunk one per cent and exports will have inched down 0.1 per cent.

And it will take a long time for the economy to fully right itself, the CBI says. Growth will be just 1.4 per cent in 2013, and still under trend at two per cent in 2014. Unemployment will stay at 7.9 per cent through 2013, only dropping 0.2 percentage points into 2014. And the government will still spend £102.2bn more than it takes in taxes in 2014 – equivalent to six per cent of GDP.