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UK GDP Growth To Be Sluggish: CBI

UK-CBI-Construction-120417-lt.jpg

UK economic growth is set to remain steady but sluggish as squeezed real wages dampen household spending and Brexit uncertainty weigh on business investment, the Confederation of British Industry said in a report on Monday.

Elsewhere, the results of the Purchasing Managers' survey showed that construction output expanded the most in five months in November, driven by housing activity.

According to the CBI's Economic Forecast, the British economy will grow 1.5 percent each this year and next. For 2019, the CBI projected 1.3 percent expansion.

The CBI forecast quarterly GDP growth of a subdued 0.3 percent up to the end of 2019. The assessment remained largely similar to that published in June.

CBI Chief Economist Rain Newton-Smith cautioned that the outlook remains subject to a high degree of downside risk - particularly in 2019, where a more disorderly outcome from Brexit negotiations could disrupt the economy and financial markets.

The business lobby expects the Bank of England to lift its key interest rate by 25 basis points each in the third quarter of 2018 and then in second and third quarters of 2019. Even after three hikes, the rate will remain relatively low at 1.25 percent, the CBI noted.

Inflation is forecast to peak at 3 percent in October 2017, before easing gradually. However, with only a lukewarm pick-up in wage growth expected, living standards are set to stay under pressure.

The forecast is based on the assumption that the agreement with the EU on a time-limited transition period will be reached sometime in the first quarter of 2018, and implemented upon the expiry of Article 50 in March 2019.

The IHS/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose to 53.1 in November from 50.8 in October. The score remained above the 50.0 no-change value for the second straight month.

The latest reading was the highest for five months. However, the improvement was largely confined to residential work.

The survey showed that resilient demand and a supportive policy backdrop had driven the strong and accelerated upturn in residential work.

by RTT Staff Writer

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