CBI sees high prices, low growth and rising interest rates

Graham_Devon

Bull nightmare!

http://www.guardian.co.uk/business/2010/dec/20/cbi-growth-inflation-interest-rates

The economy will come to a virtual standstill in the next three months as higher tax deters consumer spending, while inflation will be driven higher by energy prices, the CBI employers' body predicts today.

Downgrading its quarterly growth forecast for the first three months of 2011 from 0.3% to 0.2%, the CBI also made its first prediction for 2012, when it expects a slower pace of growth than is usual for an economy pulling out of recession.

It also predicts that a rise in inflation – which has already breached the targeted 2% for 12 months in a row – could force base rates to begin to rise off their historically low levels by the end of the second quarter of next year.

Gross domestic product will be 2.4% in 2012, according to the CBI, which described that rate of growth as "rather subdued for this stage of a recovery".

Also included in the article is:

- Real take home pay to decrease further
- Higher mortgage interest rates
- No double dip
- Base rates at 2.75% by end of 2012 (but discrepancy between that and mortgage rates).
- 2.6m unemployed by end of 2011

Happy crimbo!

chucky

Graham_Devon wrote: »

Bull nightmare!

do you reckon that will help you get a bigger house or even get you out of the shared ownership trap?

keep up the spam. the same thread is here
https://forums.moneysavingexpert.com/discussion/2934522

Really2

Graham_Devon wrote: »

Bull nightmare!

http://www.guardian.co.uk/business/2010/dec/20/cbi-growth-inflation-interest-rates



Also included in the article is:

- Real take home pay to decrease further
- Higher mortgage interest rates
- No double dip
- Base rates at 2.75% by end of 2012 (but discrepancy between that and mortgage rates).
- 2.6m unemployed by end of 2011

Happy crimbo!

Odd that they think everyone will have less in their pockets the economy will be tanking and the BOE will start tackling inflation which is not caused by a heating up economy?
Decreased take home pay, higher taxes does not equal sustained inflation, it will be less money fighting for goods not more?

But still got to go up another 5.5%+ before it goes past my repayment long term average.

System

Really2 wrote: »

Odd that they think everyone will have less in their pockets the economy will be tanking and the BOE will start tackling inflation which is not caused by a heating up economy?
Decreased take home pay, higher taxes does not equal sustained inflation, it will be less money fighting for goods not more?

Indeed, they contradict themselves without realising it.

One of the other, can't be both.

StevieJ

Those low interest rates have been a bit of a long term nightmare for the housing bears.

Bangkok-Dave

Those low interest rates have been a bit of a long term nightmare for the housing bears.

That's what I don't get. Home owners have really got it easy. Most have 200 quid a month plus extra in their pockets. The bears are trying to suggest it's a bad time. Mental.

chucky

Joeskeppi wrote: »

Indeed, they contradict themselves without realising it.

One of the other, can't be both.

they contradict themselves more often than not.

apparently it's a bull nightmare though, so it must be true

Graham_Devon wrote: »

Bull nightmare!

FantomX

StevieJ wrote: »

Those low interest rates have been a bit of a long term nightmare for the housing bears.

LOL! Who needs rising IRs when you have rising fuel bills? As per usual, the markets always find a way!

gagahouse

Joeskeppi wrote: »

Indeed, they contradict themselves without realising it.

One of the other, can't be both.

Or maybe they're expecting cost-push inflation (input costs being driven up by depreciated £ and rising commodities fuelled by QE) rather than demand pull inflation i.e stagflation

UK balance of payments has worsened since £ depreciation end of 2008 despite rising exports - the UK is too dependent on a just in time supply chain, a lot of what it exports has to be imported first as well, GBP index continues to weaken - all this is a factor in rising prices

couple that with hot QE money trying to create inflation and succeeding in the key input commodities (oil, metals, grains etc.) and now feeding into end prices you can begin to see why they are thinking like that

the BOE so far has shown they care more about sustaining aggregate demand in the economy than combating inflation - the trouble is the rising inflation is squeezing real disposable incomes suppressing aggregate demand making their job harder - raising rates to combat entrenching core inflation might work but at the expense of the general economy

my guess is the BOE can't raise rates yet and will suffer more inflation, problem is that this type of inflation will eventually do the same job as raising rates by killing discretionary demand

they're a bit screwed but it is of their own making, they've let the money printing genie out and now realise you can't just pop him back in with no cost - their hand may even be forced by market interest rates rising, a bond bubble burst forces them to defend the currency for example

there are black swans everywhere when you !!!!!! up things this bad

stringsmk2

Well the CBI really have no idea do they, look at what they wrote last year


Growth in the UK economy is set to pick up gradually next year but the economic recovery will be "fragile", a leading business group has said. The CBI predicts that the UK will exit recession in the fourth quarter of 2009, helped by consumer spending ahead of the VAT rise in January.
But the group says the economy is unlikely to have returned to pre-recession levels by the end of 2011.
It says unemployment will peak at 2.8 million - lower than first forecast.
"Although the first few months of 2010 will be difficult, growth will gradually pick up and increasing confidence and demand will lead the UK into a more positive 2011," said John Cridland, the CBI's deputy director general.
"Consumer spending looks to be slightly more resilient than we first thought, and a weaker pound will help to support export growth.
"However, the economy will be on a fragile path of very slow growth, as we continue to feel the lasting effects of the financial crisis."
Growth forecasts
The CBI's latest quarterly economic survey forecasts:
• a return to growth in the fourth quarter of this year, with the economy growing 0.5% quarter-on-quarter
• annual growth of 1.2% in 2010, followed by growth of 2.5% in 2011
• after "constrained wage growth" during 2009 and 2010, average earnings will rise by 3.9% in 2011
• UK interest rates to start rising in spring next year, reaching 2% by the end of 2010
• the consumer prices index level of inflation to rise sharply following the rise in VAT in January, before easing back and falling below the Bank of England's target rate of 2% in 2011
• oil prices to rise to almost $100 a barrel by the end of 2011 "as the global economy recovers with a relatively limited oil supply".
The group's forecast for the economy is slightly more optimistic than that of the British Chambers of Commerce (BCC).
The BCC predicts positive growth of 1% in 2010 and 2.3% in 2011.
The Treasury expects economic expansion of 1.25% in the fiscal year 2010, rising to 3.5% in each of the following two years.

satchmeister

stringsmk2 wrote: »

Well the CBI really have no idea do they, look at what they wrote last year


Growth in the UK economy is set to pick up gradually next year but the economic recovery will be "fragile", a leading business group has said. The CBI predicts that the UK will exit recession in the fourth quarter of 2009, helped by consumer spending ahead of the VAT rise in January.
But the group says the economy is unlikely to have returned to pre-recession levels by the end of 2011.
It says unemployment will peak at 2.8 million - lower than first forecast.
"Although the first few months of 2010 will be difficult, growth will gradually pick up and increasing confidence and demand will lead the UK into a more positive 2011," said John Cridland, the CBI's deputy director general.
"Consumer spending looks to be slightly more resilient than we first thought, and a weaker pound will help to support export growth.
"However, the economy will be on a fragile path of very slow growth, as we continue to feel the lasting effects of the financial crisis."
Growth forecasts
The CBI's latest quarterly economic survey forecasts:
• a return to growth in the fourth quarter of this year, with the economy growing 0.5% quarter-on-quarter
• annual growth of 1.2% in 2010, followed by growth of 2.5% in 2011
• after "constrained wage growth" during 2009 and 2010, average earnings will rise by 3.9% in 2011
• UK interest rates to start rising in spring next year, reaching 2% by the end of 2010
• the consumer prices index level of inflation to rise sharply following the rise in VAT in January, before easing back and falling below the Bank of England's target rate of 2% in 2011
• oil prices to rise to almost $100 a barrel by the end of 2011 "as the global economy recovers with a relatively limited oil supply".
The group's forecast for the economy is slightly more optimistic than that of the British Chambers of Commerce (BCC).
The BCC predicts positive growth of 1% in 2010 and 2.3% in 2011.
The Treasury expects economic expansion of 1.25% in the fiscal year 2010, rising to 3.5% in each of the following two years.

+1 you beat me to it. Over 50% out on inflation at over 3.0%, BoE rate is out by 400% and would have needed 6 months at 0.25 per month rise or 3 months with 0.5% rises per month.