The CBI says its main reasons for the downgrade are the VAT rise, due to kick in next January, and relatively low wage settlements, which means consumers will have less money to spend. It also reckons that unemployment, which it originally expected to peak at the end of 2011, is now expected to climb more gradually: it's expected to rise from 2.49m at the end of this year to about 2.62m in the last three months of 2011, and then keep climbing thereafter.
That's not to say the CBI is opposed to Government spending cuts, however. In fact, it's taking a fairly balanced view. While the outlook for next year might not be as encouraging as originally forecast, let’s look on the bright side, it says: at least growth is going to happen. And it’s will keep happening this year, too: the CBI expects the economy to grow by 0.3% and 0.6% in the last two quarters of the year. Given that the economy dragged itself out of recession in the last three months of 2009, that would mean we’d have been growing for a full year – which has got to be a good thing.
In fact, CBI chief Richard Lambert's positively chirpy view is that ‘the UK’s tentative recovery will be sustained, albeit with weaker levels of growth’. That’s certainly more cheering than ex-Bank of England Monetary Policy Committee member David Blanchflower's asssessment: ‘I absolutely don’t rule out a double-dip. I think the probability of it is rising daily,' he doom-mongered yesterday.
The picture remains unclear. But the CBI’s forecast (along with yesterday's vote of confidence from credit ratings agency Moody’s) does at least provide some support for the view that that the worst may be over, at least as far as the private sector is concerned.