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CBI cuts growth forecast for Q1 2011

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

The CBI believes that job cuts and higher-than-expected inflation will see growth cut from 0.3 to 0.2 per cent.

However, the CBI says that it does not expect he UK to fall back into recession and that growth is likely to rise to 0.4 per cent in the second quarter and 0.5 per cent in both the third and fourth quarters.

It also says that GDP will rise to 2.4 per cent in 2012.

CBI chief economic adviser Ian McCaffrey says: “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.”

It also says that continued high inflation next year will force the BoE to gradually raise interest rates in the spring and the base rate will hit 2.75 per cent by the final quarter of 2012.

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