Bank of England cuts 2013 growth forecast to 1.0%

The Bank of England on Wednesday cut its forecast for British economic growth next year to about 1.0 percent owing to the sovereign debt crisis in the neighbouring eurozone. Britain's gross domestic product (GDP) would average about 1.0 percent in 2013, down from the central bank's previous forecast of around 2.0 percent, according to a fan chart in the central bank's latest quarterly report. "The future path of GDP will depend critically on developments in the global environment, with strains in the euro area posing the greatest risk to a sustained recovery," the Bank of England said in its report. "The outlook for UK growth remains uncertain. A major threat to a sustained recovery is if the adjustments in indebtedness and competitiveness required within the euro area occur in a disorderly manner," the BoE added. Recent data showed that Britain's economy rebounded by 1.0 percent in the third quarter of 2012, or three months to September, bouncing back from a double-dip recession. Growth turned positive on one-off factors, including the London 2012 Olympic Games and rebounding activity after an extra public holiday for Queen Elizabeth II's Diamond Jubilee in the second quarter. "GDP is estimated to have increased by 1.0 percent in Q3, although that strength was exaggerated by temporary factors," the BoE said in Wednesday's report. "Headline growth is consequently likely to fall back sharply in Q4," it warned. The BoE also forecast that consumer prices index (CPI) annual inflation would fall back towards the government's 2.0-percent target in the second half of 2013, later than previously thought. Official data on Tuesday showed that inflation surged to a higher-than-expected rate of 2.7 percent in October largely owing to massive hikes in British university tuition fees.