CBI forecasts faster growth for UK

BRITAIN'S biggest business group today lifted its economic growth forecasts as it revealed that manufacturing order books are at their fattest for six years.

The CBI now expects the economy to expand by 3.2% this year, up from an earlier estimate of 3%. For 2005, its forecast is raised from 2.8% to 3%.

It said strong consumer spending - fuelled by low unemployment, rising pay, willingness to borrow and a strong housing market - was driving the economy.

But it warned that spiralling oil prices and financial market instability posed a threat to an otherwise rosy outlook.

The prognosis came as the CBI's latest snapshot of manufacturing showed demand from home and abroad has pushed total orders to a six-year high. Firms' output expectations are at their strongest for five years.

CBI chief economist Ian McCafferty urged the Bank of England to continue its gradual approach to raising interest rates. 'Shock tactics would add further uncertainty,' he said.

Meanwhile, the Martin Hamblin GfK consumer confidence barometer was unchanged at minus two in May. It said consumers had failed to react to the latest rise in interest rates.