In its latest economic forecast, the CBI yesterday said that as a result of “robust investment growth” and “a firmer rise in household spending” the UK would see "decent quarterly GDP growth" for both businesses and consumers.
The employers' organisation, which represents 190,000 businesses that employ around 7 million people, has upgraded its growth forecast to 2.6% this year and to 2.8% for next year, up from its June forecast of 2.4% and 2.5% respectively.
It has also revised up its business investment growth forecast for 2015 to 6.2% from 4.5% in June, following stronger than expected Q1 numbers and the CBI’s business surveys pointing to increased capital spending in the year ahead.
It expects growth to average 0.7% a quarter until the end of 2016, in line with that seen in Q2 this year.
CBI director general John Cridland said the group was seeing tentative signs of production picking up but added: “The outlook on exports is somewhat muted. The strong pound is hampering our competitiveness abroad and growth in the eurozone, our biggest trading partner, and will remain subdued for the foreseeable future, particularly given renewed uncertainty.
“We now expect interest rates to rise to 0.75% in the first quarter of 2016, and then rise at a slow pace thereafter. This is earlier than our previous prediction of an increase in Q2. Across the Atlantic, the US Federal Reserve looks likely to raise interest rates before Christmas.
“We expect a modest recovery in productivity further ahead, which contributes to our forecast for stronger earnings growth (2.5% in 2015 and 2.8% in 2016) relative to June (2% and 2.4%).
“Net trade, however, remains weak, dragging on growth over the forecast period (contribution of -0.3% in 2015, and -0.1% in 2016).”
CBI director of economics Rain Newton-Smith warned that “pipeline inflationary pressures” were building as domestic demand and wages grow.
he said: “Our members are talking more about capacity constraints and skills shortages. Along with more hawkish noises from the Bank of England’s Monetary Policy Committee, we now expect Q1 2016 will be the time for that first, very gradual increase in interest rates here in the UK.”
BPIF chief executive Charles Jarrold welcomed the forecast but warned that strong competition still meant restrained pricing for printers.
“The print sector often acts as a bellwether for the wider economy, with its fortunes determined by changes in the overall economy,” he said.
“It's therefore encouraging that the CBI is increasingly positive in its outlook, especially with economic recovery being led not just by household spending, but by business investment too.
“The CBI outlook matches our own most recent Printing Outlook industry survey, where companies are reporting investment in both skills and equipment to raise productivity, and input prices remain stable. Nevertheless, competitive pressures continue to restrain pricing levels.”