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15/09/2008
CBI Says UK Is In Early Stages Of Recession
The UK is in the early stages of a technical recession, the Confederation of British Industry (CBI) said today.
In its latest forecast a shallow recession through the second half of 2008 means that growth in the economy in 2009 will be the lowest since 1992.
The UK's leading business organisation has cut its GDP growth predictions for both 2008 and 2009, reflecting the sharper-than-expected slowdown over the first half of this year and the impact of weak consumer demand, high energy and commodity prices and the enduring effects of the credit crunch.
The growth forecast for 2008 has been downgraded from 1.7% to 1.1%.
However, GDP should stabilise early in 2009 ahead of a gradual and growing recovery, with quarter-on-quarter GDP growth reaching a near-trend rate of 0.6% by the end of next year. Nevertheless, for 2009 as a whole, the GDP growth forecast has been cut from 1.3% to 0.3%.
Richard Lambert, CBI Director-General, said: "Over the past year our forecasts for economic growth have been shaved lower and lower as the UK economy continues to struggle with the twin impact of higher energy and commodity prices and the credit crunch. Growth in 2009 will be feeble at best.
"Having experienced a rapid loss of momentum in the economy over the first half of 2008, the UK may have entered a mild recession that will hopefully prove short lived. This is not a return to the 1990s, when job cuts and a slump in demand were far more prolonged.
"The squeeze on household incomes and company profit margins from higher costs will begin to ease as the price of oil moves downwards and, although the credit crunch will be with us for some time, conditions are set to improve later in 2009.
"The Bank should have leeway to cut interest rates and, as inflation falls, we should be well placed to move beyond this difficult stage in the business cycle. If all goes well there should be room for a half point cut in November to help restore confidence in the beleaguered economy."
The CBI believes that unemployment will break the two million mark in 2009, reaching 2.01 million and a jobless rate of 6.5%. Average earnings growth is expected to remain fairly subdued, which will aid the improving inflation outlook.
Sharp rises in fuel and food costs, the resulting decline in real incomes and the troubled housing market have undermined consumer confidence and dampened household spending, and the CBI predicts that household consumption will contract by 0.3% in 2009.
(CD/JM)
In its latest forecast a shallow recession through the second half of 2008 means that growth in the economy in 2009 will be the lowest since 1992.
The UK's leading business organisation has cut its GDP growth predictions for both 2008 and 2009, reflecting the sharper-than-expected slowdown over the first half of this year and the impact of weak consumer demand, high energy and commodity prices and the enduring effects of the credit crunch.
The growth forecast for 2008 has been downgraded from 1.7% to 1.1%.
However, GDP should stabilise early in 2009 ahead of a gradual and growing recovery, with quarter-on-quarter GDP growth reaching a near-trend rate of 0.6% by the end of next year. Nevertheless, for 2009 as a whole, the GDP growth forecast has been cut from 1.3% to 0.3%.
Richard Lambert, CBI Director-General, said: "Over the past year our forecasts for economic growth have been shaved lower and lower as the UK economy continues to struggle with the twin impact of higher energy and commodity prices and the credit crunch. Growth in 2009 will be feeble at best.
"Having experienced a rapid loss of momentum in the economy over the first half of 2008, the UK may have entered a mild recession that will hopefully prove short lived. This is not a return to the 1990s, when job cuts and a slump in demand were far more prolonged.
"The squeeze on household incomes and company profit margins from higher costs will begin to ease as the price of oil moves downwards and, although the credit crunch will be with us for some time, conditions are set to improve later in 2009.
"The Bank should have leeway to cut interest rates and, as inflation falls, we should be well placed to move beyond this difficult stage in the business cycle. If all goes well there should be room for a half point cut in November to help restore confidence in the beleaguered economy."
The CBI believes that unemployment will break the two million mark in 2009, reaching 2.01 million and a jobless rate of 6.5%. Average earnings growth is expected to remain fairly subdued, which will aid the improving inflation outlook.
Sharp rises in fuel and food costs, the resulting decline in real incomes and the troubled housing market have undermined consumer confidence and dampened household spending, and the CBI predicts that household consumption will contract by 0.3% in 2009.
(CD/JM)
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