UK economic growth will slow to its lowest level since 1992 next year, employers' group the CBI has warned.
UK economic growth will slow to its lowest level since 1992 next year, employers' group the CBI has warned.
In March, the CBI lowered expected GDP growth for 2009 from 2.1% to 1.7%.
In March, the CBI lowered expected GDP growth for 2009 from 2.1% to 1.7%.
It has revised the number downwards once more, now putting expectations at 1.3%, as households tighten belts due to higher food and fuel prices.
It has revised the number downwards once more, now putting expectations at 1.3%, as households tighten belts due to higher food and fuel prices.
The CBI said a "very prolonged period of very sluggish growth" was in prospect for the UK but it was not predicting a recession.
The CBI said a "very prolonged period of very sluggish growth" was in prospect for the UK but it was not predicting a recession.
The CBI's forecast is well below that of the government, which is still expecting the economy to recover to grow at around 2.5% next year.
The Chancellor is expected to address the growing strains on the economy when he delivers his Mansion House speech to the City of London on Wednesday.
Inflation
Inflation
Our best bet is still that there will be a measure of economic growth in 2009 Richard Lambert,CBI director general
Our best bet is still that there will be a measure of economic growth in 2009 Richard Lambert,CBI director general
And just as signficantly, the CBI also warned that inflation was likely to breach the government's 2% for some time to come, driven by higher oil prices.
And just as significantly, the CBI also warned that inflation was likely to breach the government's 2% for some time to come, driven by higher oil prices.
It predicts that inflation will peak at 3.8%, and says it expects it to rise to 3% when new figures are released on Tuesday.
It predicts that inflation will peak at 3.8%, and says it expects it to rise to 3% when new figures are released on Tuesday.
If inflation is 1% higher than the government's target, then the governor of the Bank of England must write a letter to the Chancellor explaining why he has failed to meet the target.
If inflation is 1% higher than the government's target, then the governor of the Bank of England must write a letter to the Chancellor explaining why he has failed to meet the target.
Recession fears
Recession fears
High inflation will make it more difficult for the Bank of England to cut inrterest rates to prevent a possible recession.
High inflation will make it more difficult for the Bank of England to cut interest rates to prevent a possible recession.
Indeed, financial markets now expect the Bank to raise rates by the end of the year.
Indeed, financial markets now expect the Bank to raise rates by the end of the year.
And there is also little leeway for the government to increase public spending, as it already facing a record public sector deficit.
And there is also little leeway for the government to increase public spending, as it already facing a record public sector deficit.
However, the slowing economy will eventually reduce inflation.
However, the slowing economy will eventually reduce inflation.
That slowdown may not be a full-blown recession.
That slowdown may not be a full-blown recession.
There are a number of definitions of a recession, with economists often differing on what is required.
There are a number of definitions of a recession, with economists often differing on what is required.
However, the most-used definition of a recession is when there are two quarters in a row of economic contraction, or negative growth.
However, the most-used definition of a recession is when there are two quarters in a row of economic contraction, or negative growth.
'Firms leaner'
'Firms leaner'
CBI director general Richard Lambert said: "Over the past year, the CBI has consistently had to revise down its forecasts for economic growth.
CBI director general Richard Lambert said: "Over the past year, the CBI has consistently had to revise down its forecasts for economic growth.
"The main reason is that the oil price - measured in depreciated sterling - has continued to rise strongly, roughly doubling since the spring of 2007.
"The main reason is that the oil price - measured in depreciated sterling - has continued to rise strongly, roughly doubling since the spring of 2007.
"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 in the face of the economic slowdown.
"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 in the face of the economic slowdown.
The profile still suggests the UK will avoid a recession Ian McCafferty,CBI chief economic adviser
The profile still suggests the UK will avoid a recession Ian McCafferty,CBI chief economic adviser
"Our best bet is still that there will be a measure of economic growth in 2009. But the outlook has deteriorated in recent months, and considerable uncertainties remain."
"Our best bet is still that there will be a measure of economic growth in 2009. But the outlook has deteriorated in recent months, and considerable uncertainties remain."
Mr Lambert said it was not a prediction of recession, saying that in the early 1990s a drop in consumer demand was coupled with large job cuts.
Mr Lambert said it was not a prediction of recession, saying that in the early 1990s a drop in consumer demand was coupled with large 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."
"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."
The business organisation says consumption growth will be down to only 0.7% in 2009 - also the lowest since 1992.
The business organisation says consumption growth will be down to only 0.7% in 2009 - also the lowest since 1992.
Inflation, which the CBI expects to hit 3.8% within four months, will limit the capacity for the Bank of England to cut interest rates and increase spending, it says.
Inflation, which the CBI expects to hit 3.8% within four months, will limit the capacity for the Bank of England to cut interest rates and increase spending, it says.
Ian McCafferty, the CBI's chief economic adviser, said: "The profile still suggests the UK will avoid a recession, in the sense of two quarters of negative GDP growth, but it is a very prolonged period of very sluggish growth in prospect."
Ian McCafferty, the CBI's chief economic adviser, said: "The profile still suggests the UK will avoid a recession, in the sense of two quarters of negative GDP growth, but it is a very prolonged period of very sluggish growth in prospect."
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