Despite the squeeze on household incomes from higher commodity prices and an erosion of business confidence, the CBI still expects the economy to grow by 1.3 per cent this year, compared to 1.7 per cent forecast in May. GDP growth of 2.2 per cent is expected in 2012, unchanged from May’s forecast.
“The economic outlook has become even more challenging, but we still expect the economy to continue to grow modestly this year and next,” explained John Cridland, CBI director-general. “The global economy has slowed in the face of several shocks including the Japanese tsunami and soaring commodity prices.
“These factors have combined with political uncertainties around the Eurozone sovereign debt crisis, the wrangling in Congress over the US debt ceiling and the policy tightening in China to erode confidence and soften activity. It may be a lacklustre recovery, but with solid net trade contributions and the positive impact of business investment, the UK will remain on a growth track.”