CBI says recession talk is "overstated

By Hamish Champ

- Last updated on GMT

Related tags: Cbi, Macroeconomics

The credit crunch and rising commodity prices are likely to hit economic growth in 2008, according to business leaders.The Confederation of British...

The credit crunch and rising commodity prices are likely to hit economic growth in 2008, according to business leaders.

The Confederation of British Industry (CBI) has downgraded its forecast for UK growth for the third quarter running, as problems continue in the world's credit markets and oil prices hit record levels.

However, talk of a full-blown recession is "overstated", the organisation said.

The CBI believed consumer spending would slow more sharply than previous forecasts, with growth falling from 3.1 per cent this year to 1.9 per cent in 2008.

However, it said it felt that the rate of increase in real household incomes would pick up "modestly" following weaker growth in 2007, "offering some support to consumer spending".

Inflation will rise during 2008, said the CBI, due to the higher price of oil, gas and food. The CBI forecasts it will reach a peak of around 2.6 per cent towards the end of the year, after which it should fall back to around the target rate of 2.0 per cent by the end of 2009.

Ian McCafferty, the CBI's chief economic adviser, said: "Whilst the 2008 slowdown may appear dramatic set against this year's strong growth, the fundamentals of our economy remain sound and talk of a full blown recession is overstated."

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