The CBI, the business group that’s normally more bearish than Gentle Ben’s family reunion, has issued its latest predictions on the UK economy – and it seems to be as gloomy as ever. It’s slashed its growth forecasts for UK GDP in 2009 by a further 0.4%, arguing that we’ll now be lucky to hit 1.3%, while it’s predicting that consumption growth will sink to a measly 0.7%. Both figures would be the worst since the 1992 recession.
And it’s not the first time that the CBI has told us that things are actually going to be a lot worse than we thought. ‘Over the past year, the CBI has consistently had to revise down its forecasts for economic growth,’ admitted director-general Richard Lambert today. He blamed this largely on the spiralling cost of fuel, which has ‘squeezed household incomes and companies' profit margins’ and made it harder for the Bank of England to trim interest rates.
On the other hand, the CBI still thinks we’ll avoid a recession – at least in the technical sense of two consecutive quarters of negative growth. Lambert said we were a lot better off than we were back in the early 1990s, when slowing consumer demand also led to wide-ranging job cuts. ‘These days, firms are leaner and more efficient and our economy's reach is far more global. We should avoid believing a recession is inevitable, or talk ourselves into unnecessary trouble.’
All well and good – but it seems a bit ironic that the CBI of all people are warning against talking ourselves into recession. After all, it’s spent most of the year publicly slashing its growth forecasts and telling us how bad things are going to be in the coming months. Take chief economist Ian McCafferty today: ‘The twin effects of slowing demand and rising commodity prices provide a wind chill factor and will make things feel much less comfortable over the next two years’.
Of course it may well be absolutely right - but it's not exactly done much to add to the dwindling supply of gross national optimism, has it...?