By Richard Johnstone | 13 May 2013
The UK economy is set to avoid any further contraction throughout the rest of this year as the recovery moves from flat output to consistent growth, the CBI said today.
In its latest economic forecast, the business group predicted gross domestic product would increase by 1% in 2013, following the Office for National Statistics’ estimate of a 0.3% increase in output in the first three months of 2013.
The CBI said it expected growth of 0.3% in the second quarter, 0.4% in the third and 0.4% in the final quarter of 2013. In 2014 GDP would rise by 2%, following increases ranging between 0.5% and 0.6% each quarter, it said.
It also forecast unemployment would rise from its current level of 2.56 million to 2.58 million later this year, before falling slightly to 2.51 million in 2014.
Inflation, currently 2.8%, would peak at 3.1% in the second quarter of 2013, before starting to fall steadily for the rest of the year, according to the forecast. However, it would remain above the Bank of England’s target 2% rate for the Consumer Prices Index throughout all of 2014.
CBI director general John Cridland said there were signs that the UK economy was moving back to growth, but added that uncertainty in the eurozone was continuing to hit output. ‘Although recent data suggests rising business confidence, the economic climate remains tough, hampering demand here and overseas. Meanwhile, consumers remain under pressure, as inflation continues to outstrip wage growth.
‘Now the government needs to pick up the baton and deliver on promises to get finance to firms, cut red tape and help drive up exports.’
