SOARING fuel costs and weaker consumer demand will reduce economic growth next year to its lowest level since 1992, the CBI warns today.
In the latest indication that the economy is stalling, the employers' group has lowered its growth expectations to 1.3 per cent in 2009.
If the CBI is right, that would be the poorest growth performance since the 0.2 per cent 16 years ago, when t
he UK was struggling out of the last recession.
The figure is its second economic downgrade in three months. In March, the CBI lowered the expected GDP growth next year from 2.1 to 1.7 per cent.
The CBI said a slowdown already underway in consumer spending would intensify next year, driving consumption growth down to only 0.7 per cent – the lowest since 1992's 0.5 per cent rise.
Inflation – expected to rise to 3.8 per cent within four months – would reduce the capacity for the Bank of England to cut interest rates and boost spending.
The price of oil has continued at an unprecedented rise this year, up around a third so far, leading to spiralling fuel and raw material costs.
CBI director-general Richard Lambert said the main reason the organisation had to revise its forecast again was the price of oil.
He added: "This has squeezed household incomes and companies' profit margins, and has also made it much harder for the Bank of England to cut interest rates."
The full article contains 252 words and appears in The Scotsman newspaper.
