The UK's biggest business lobby, the CBI, has trimmed its economic growth forecast for 2002, citing stock market volatility and a sluggish recovery in the US.

This recovery is likely to be slow going

Ian McCafferty, CBI Chief Economist

The CBI said on Thursday it was lowering its forecast for UK growth this year to 1.5%, from 1.7% in May.

The CBI also predicted that underlying inflation would come in at 2.1% for 2002, rising to 2.4% next year.

"Global uncertainty has weakened the UK economic outlook," said CBI Chief Economist Ian McCafferty.

"Predictions of a speedy US recovery have failed to materialise, while recent stock market volatility and corporate scandals have increased uncertainty."

Manufacturers suffer

Also on Thursday, the CBI published a survey showing that weak overseas demand was holding back recovery in the UK's embattled manufacturing sector.

The survey showed that 40% of manufacturers received fewer orders than usual in August, while just 16% received more than usual.

The net balance of minus 24% was unchanged from July.

UK factories' flat order books partly reflected persistently weak export demand, with a net balance of minus 30% reporting below average export orders.

"In recent months manufacturers have become more doubtful about the speed of the world economic recovery," said CBI Chief Economist Ian McCafferty.

Ray of light

However, a positive balance of 16%, the highest since March 2000, said they expected production to increase overall in the months ahead.

Larger firms were more optimistic than smaller ones, with firms in the food, drink and tobacco sectors tending to be most bullish of all.

But companies in the textile, building materials and engineering sectors were more cautious over their future prospects.

"This recovery is likely to be slow going. Companies will need to be patient and maintain realistic expectations for some time to come," said Mr McCafferty.