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Thursday, November 26, 1998 Published at 22:04 GMT

Business: The Economy

CBI slashes UK growth forecast

A recession is looking more and more likely in manufacturing

The UK economy will avoid recession next year, but growth will fall below 1%, according to predictions from the employers' body the Confederation of British Industry (CBI).

BBC Economics Correspondent Ed Crooks: People are afraid of spending money and Christams could be a retailing disaster
In its latest quarterly economic forecast, the CBI calls for further cuts in interest rates after revising its growth predictions downwards.

The forecast suggests that gross domestic product growth will average 0.7% next year - 0.5% lower than the last estimate in August.

Growth is then expected to rise to 1.8% in 2000.

This follows estimated growth of 2.7% this year.

Manufacturing recession looms

The CBI said UK manufacturing was "increasingly likely" to suffer a recession.

[ image: Will the data persuade the MPC to cut rates again?]
Will the data persuade the MPC to cut rates again?
Total order books in its November industrial trends survey fell to their lowest levels in a monthly survey since 1992.

The CBI also said output expectations in November were at their lowest since 1991, while price expectations were the lowest ever recorded.

Export demand also remained weak, although it enjoyed a slight recovery in November, it said.

Analysts said the survey pointed to another easing of interest rates when the Monetary Policy Committee meets next on 8 December.

Adam Cole of HSBC said the survey revealed "no signs of any real improvement in the trend in manufacturing ouput and it's still pointing to big year-on-year falls"

He said price expectations were also more pessimistic than ever before, adding: "The only question from this seems to be, how far are prices going to fall?"

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