CBI cuts growth forecasts amid 'fragile' confidence

The UK economy will grow by just 0.6 per cent in 2012, according to the latest forecast from the CBI.

The estimate is lower than the business group's previous forecast of 0.9 per cent growth over the year.

The CBI also expects growth over the second quarter of the year to come in at exactly 0 per cent. However, it expects growth to return in the second half of the year, pulling the UK out of recession and bouncing back to 2 per cent in 2013.

John Cridland, pictured, CBI director general, said: "The global economy continues to pose a number of significant challenges. Concerns over eurozone stability are on the rise again, oil prices remain high and confidence among businesses and households is still fragile. We have always said that the path back to sustainable economic growth will be a long and difficult one, with many bumps along the way. To rebalance our economy towards exports and investment will take time and patience."

A new survey suggested yesterday that the construction industry continued to expand last month.

The Markit/Cips Purchasing Managers' Index (PMI) for April came in at 55.8, down on the 56.7 of the previous month, but still well above the 50 level that separates contraction from expansion.

The figures sharpened the raging debate among analysts over whether the latest estimates from the Office for National Statistics (ONS) present an accurate picture of the health of the sector.

ONS figures last week showed the building sector contracted by 3 per cent in the first three months of 2012, helping to push the UK into a double-dip recession.

But the construction PMIs have been positive since the turn of the year causing confusion among economists.

"Either the ONS or Markit has got this number wrong," said Commerzbank's Peter Dixon . "I'm inclined to believe that the construction sector was stronger than the ONS estimate."