CBI predicts recovery will 'pick up' over rest of year
A leading business organisation moved to lift some of the gloom hanging over the UK economy yesterday by forecasting a 'pick-up' in the recovery throughout the remainder of 2012.
The CBI cut its growth forecast for 2012 to 0.6%, from 0.9% estimated in February, after official figures revealed the economy fell back into recession in the first three months of the year.
But the lobby group, which represents some 240,000 UK companies, insisted optimism among businesses had been increasing and manufacturing demand had held up, pointing towards increased momentum in the second half of the year.
A slide in construction output and a weak services sector were blamed for a surprise 0.2% dip in gross domestic product between January and March, which, after a fall of 0.3% the previous quarter, caused the UK's first double-dip recession since the 1970s.
John Cridland, CBI director-general, said: "We have always said that the path back to sustainable economic growth will be a long and difficult one, with many bumps along the way.
"To re-balance our economy towards exports and investment will take time and patience."
He added: "Optimism among businesses has been increasing since the turn of the year, with manufacturing demand holding up.
"And that is beginning to translate into more jobs and investment."
But Mr Cridland warned that the global economy still poses a number of challenges, including eurozone worries, high oil prices and fragile household confidence.
The CBI believes public sector borrowing will be £8bn higher than forecast by the tax and spending watchdog, the Office for Budget Responsibility, at £128.2bn in 2012/2013 and £104.1bn in 2013/14.
Ian McCafferty, CBI chief economic adviser, said: "Over the winter, the economy has been bumping along the bottom, and with the distortions from an extra bank holiday in the second quarter, is likely to stay that way until summer."
The rate of UK GDP growth the CBI has predicted for 2012