CBI downgrades recovery forecast

The CBI has reduced its forecast for economic growth for the first quarter of 2011. The previous forecast was 0.3%, but this has been downgraded to 0.2%, with inflation and public sector job cuts impacting the recovery.

However, the CBI did stress that it did not expect the economy to lurch back into recession, and its forecast for the second quarter is a growth of 0.4%.

Consumer spending is likely to be hit by higher energy bills and the increase in VAT to 20%.

Chief economic adviser at the CBI, Ian McCafferty, said: “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."

I can’t see that it’s surprising myself. The recession was pretty bad, but it has long gone – yet, people still refer to us being in a recession. The mood is still bleak and angry, and I can easily see that this will keep economic growth sluggish.

All this is in spite of economic growth of 0.8% between July and September. It was good news, but did little to lighten the mood. It’s going to be a long, hard climb. I would have thought anyone could see that.