CBI forecasts hiked up and business coffers wrench open

The CBI business lobby has lifted its economic growth forecast from 1% to 1.2%

by Gabriella Griffith
Last Updated: 30 Aug 2013
Another week, another flash of good economic news to deliver some lesser-spotted Monday smiles. The CBI has revised up its economic growth forecast from 1% to 1.2% for 2013 and has predicted a 7.3% increase in business investment.
 
 The hike in investment, compared with a 2.8% decline this year, would represent the largest increase in business spending since the glory days of 2007. The number crunchers at the CBI have also increased their growth forecast for 2014 from 2% to 2.3%, putting the lift down to an increase in disposable income and in the aforementioned business investment.
 
‘The economy has started to gain momentum and confidence is picking up, but it's still early days,’ said CBI director-general John Cridland.
 
‘We need to see a full-blown rebalancing of our economy, with stronger business investment and trade, before we can call a sustainable recovery.
 
‘We hope that will begin to emerge next year, as the eurozone starts growing again.’
 
The CBI, which represents 240,000 UK businesses, gave its backing to Mark Carney’s much-debated ‘forward guidance’, suggesting it should add positive sentiment. The strategy, of keeping interest rates down until unemployment drops to 7%, came under fire last week, due to the stream of positive data pouring in from various areas of the economy, including the retail and services industries.
 
The retail industry was bestowed with even further good news this morning from the British Retail Consortium (BRC); it revealed footfall in the UK’s shopping areas was up 0.8% in July and the shop vacancy rate has dropped from 11.9% in April to 11.1% in July.
 
For high-street shop owners, the news will be as welcome as a busload of cash-laden, retail hungry tourists. Bricks-and-mortar stores have been losing ground to their internet-based peers for some time now but it seems the warm weather has reversed their fortunes, as online sales actually fell by 2% in July compared to June according to IMRG Capgemini’s online sales index (the first ever fall recorded by the index).
 
‘The warm weather encouraged shoppers to leave their homes and shop on the high street to enjoy the sunshine. As a result, bricks-and-mortar retailers saw sales rise,’ said Alex Smith-Bingham, from Capgemini Consulting.
 
Manufacturing too was the subject of jubilation today thanks to two separate surveys, one from the EEF manufacturers’ organisation and the other from Barclays, which both indicated British manufacturers are poised for a swathe of investment.
 
The EEF survey found 70% of manufacturers are planning to invest in new projects and products – something many have hitherto been reluctant to do.
 
The bounty of good news for the UK economy joins last week’s good tidings from the eurozone, where figures showed it had emerged out of recession after an 18-month economic contraction.
 
Business owners could be forgiven for cracking open the champers but it might not be time to polish the flutes just yet, despite the raft of good results and an upswing in growth forecasts. The CBI has been quick to warn we aren’t out of the woods just yet - it's now the turn of the emerging markets to stumble, as today's collapse of the rupee to a record low of 62.7 against the dollar indicates.
 
‘Despite a relatively stable global environment over the last year, risks remain as financial markets move to a new regulatory environment and the eurozone continues to evolve,’ said CBI’s director of economics, Stephen Gilfford.
 
‘Meanwhile, emerging markets are facing structural challenges, particularly as China rebalances towards domestic consumption, which indicates muted growth prospects.’

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