CBI revises down growth forecast

The CBI says job cuts and higher bills will restrict consumer spending in 2011

The CBI has downgraded its forecast for UK economic growth in the first quarter of 2011.

The employers organisation expects growth of 0.2%, down from 0.3%, as public sector jobs and higher-than-expected inflation slow the recovery.

But the CBI stressed that it does not expect the UK to fall back into recession, and expects growth in the second quarter to rise to 0.4%.

Higher VAT and energy bills will hit consumer spending, the CBI said.

CBI chief economic adviser Ian McCafferty said: “Quarterly growth at the start of 2011 is likely to be very sluggish, although we do expect the recovery itself to stay on track.

“What is striking is how little we see growth accelerating in 2012. Typically, by the third year of a recovery, growth would be more robust than we expect for either 2011 or 2012.”

The CBI said that after 0.4% growth in the second quarter, it expects 0.5% for each of the third and fourth quarters, giving a 2% annual growth rate for the year.

The CBI also made its first estimate for gross domestic product growth in 2012, which it expects to be 2.4%. This is slower than usual for the third year of a recovery from recession, the CBI said.

VAT is due to rise from 17.5% to 20% from 4 January, Government job cuts are gathering pace, and higher energy, food and clothing costs are on the way.

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