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Economy to 'decelerate' in 08

The Confederation of British Industry (CBI) has warned that the economy will decelerate next year as a result of the credit squeeze and continued oil price rises.

Its latest quarterly forecast, published today, predicts next year’s annual rate of GDP growth to be 2%, down 0.2% on September’s figure and the third consecutive reduction this year.

Consumer spending, which grew 3.1% this year, is expected to slow to 1.9% for 2008.

The news isn’t all bad, though.

Growth of emerging economies and the expected depreciation of the pound should help to support export markets and, in turn, aid the UK’s economic prospects.

Inflation, meanwhile, is set to rise to around 2.6% by the end of 2008, before falling back to the target of 2% by the end of 2009.

CBI chief economic adviser Ian McCafferty said: “Whilst the 2008 slowdown may appear dramatic set against this year’s strong growth, the fundamentals of our economy remain sound and talk of a full blown recession is overstated.”

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