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UK economy will contract 0.3% in 2012, says CBI UK economy will contract 0.3% in 2012, says CBI
(about 1 hour later)
The CBI, the lobbying organisation for big business, has cut its growth forecast for the UK economy "to reflect weaker economic conditions". The UK economy is set to contract this year, according to the CBI, the lobbying organisation for big business.
It expects UK gross domestic product (GDP) to contract by -0.3% in 2012, href="http://www.cbi.org.uk/media-centre/press-releases/2012/08/cbi-cuts-growth-forecast-to-reflect-weaker-economic-conditions/" title="link to CBI press release" >it said in a statement. href="http://www.cbi.org.uk/media-centre/press-releases/2012/08/cbi-cuts-growth-forecast-to-reflect-weaker-economic-conditions/" >It expects UK gross domestic product (GDP) to shrink by 0.3% in 2012, compared with an earlier forecast of 0.6% growth.
In May, the CBI had forecast full-year growth of 0.6%. The CBI said the change reflected "weaker economic conditions".
But it said the economy would recover slightly in the second half of year and rise 1.2% in 2013, down from an earlier forecast of 2%. It said the economy would recover slightly in the second half of year and grow by 1.2% in 2013, although this was down from an earlier forecast of 2%.
The latest official statistics showed that the economy contracted by 0.5% in the second quarter of the year, the third successive quarter in which it has shrunk.
Economy 'flat'
Heavy discounting by retailers and a sharp fall in world commodity prices has led to a faster-than-expected drop in the rate of inflation, it said.Heavy discounting by retailers and a sharp fall in world commodity prices has led to a faster-than-expected drop in the rate of inflation, it said.
Downward pressure on wages would help keep inflation close to the Bank of England's 2% target throughout 2013.Downward pressure on wages would help keep inflation close to the Bank of England's 2% target throughout 2013.
This would lead to a rise in dispoable household incomes and a "modest boost" in consumer spending, it said. This would lead to a rise in disposable household incomes and a "modest boost" in consumer spending, it said.
John Cridland, the CBI's director general, said: "At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year."John Cridland, the CBI's director general, said: "At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year."
The CBI believes economic difficulties in the US and the eurozone will continue to keep a lid on UK exports.The CBI believes economic difficulties in the US and the eurozone will continue to keep a lid on UK exports.