Despite the ONS revealing last week that the UK economy has slumped back into recession, the CBI says it expects British growth will resume in the second half of 2012 with faster GDP growth during 2013.
According to the latest figures from its quarterly economic forecast, the CBI expects GDP growth in 2012 will be 0.6%, slightly down from its forecast in February of 0.9%. This is a direct consequence of the preliminary ONS figure for quarter one. Despite this, growth prospects remain broadly unchanged for the latter half of the year and, in 2013, the CBI forecasts GDP growth to be 2.0%.
Quarter-on-quarter growth is expected to be flat in the second quarter of 2012 (0%), affected by the impact of the additional bank holiday for the Diamond Jubilee.
However, the business group said there will be an improvement in the second half of the year reflecting an improving global economy and an expected easing in inflationary pressures, plus a slight boost from the Olympic Games.
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. Nevertheless, business surveys suggest that underlying conditions are starting to improve, and that we should see more momentum in the second half of the year.”
While inflation is expected to be somewhat higher than previously thought throughout 2012, in part due to recent oil price rises, it should continue on a downward trend and come close to hitting the Bank of England’s target in the spring of 2013.
As recent surveys have indicated, uncertainty over demand is easing and, as a result, there will be a modest rise in business investment, growing at around 4% in 2012 and 5% next year.
Exports are forecast to see a small rise this year (1.5%), affected by lower levels of economic activity in the Eurozone area, but are expected to increase by around 6% in 2013, as the global economic outlook strengthens.