UK economic outlook brightens but 2010 will still be tough
Monday, 28th September 2009
The UK economy is expected to emerge from recession through modest growth in the third and fourth quarters of this year, but constraints on demand will ensure that growth in 2010 is fragile.
Revealing its latest economic forecast, the CBI said that near-term economic prospects were brightening. A recovery is underway in the global economy, which has been boosted by substantial fiscal and monetary stimuli, and the inventory cycle is starting to turn, both at home and abroad, which is helping to lift production.
However, the pace of recovery in 2010 is expected to be slow.
The CBI predicts that UK GDP will post quarter-on-quarter growth of 0.3% in 2009 Q3, edging up to 0.4% in Q4 as consumers bring spending forward in advance of the VAT increase in January. However, this will dampen spending in early 2010 and although companies may be rebuilding stocks, they are likely to do so very cautiously. As a result, 2010 should start with very weak growth of only 0.1% in Q1 2010, and 0.3% in Q2.
Richard Lambert, CBI Director-General, said: "The outlook is improving as the UK draws strength from quantitative easing, a weak pound and a recovering global economy. Although growth this quarter should mark the end of the recession, conditions in the UK will remain tough for some time yet, and it is difficult to see where demand growth will come from."
