How will your spending change?

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Last Modified: 16 Feb 2009
By: Channel 4 News

Buisness leaders predict that household spending will fall, unemployment will rise to three million, and wage increases will shrink as the economy falls deeper into recession.

In its latest dire warning on the economy, the Confederation of British Industry (CBI) - which represents 240,000 firms in the UK - said the economy will shrink by 3.3 per cent in 2009, compared with its November forecast of a 1.7 per cent contraction.

As part of its forecasts, the CBI also says that government will have to borrow almost £100bn more than previously forecast as it tries to bring a deeper-than-expected UK recession under control.

See below for the CBI's predictions of how the recession will affect your money:



* Household will spend less with consumption falling by 2.7 per cent in 2009 and a further 0.2 per cent in 2010, compared to a 1.7 per cent increase in spending in 2008.

* Household will save more with the ratio of income saved increasing from 0.8 per cent in 2008 to 2.8 per cent in 2009 and 4.5 per cent in 2010.

* Inflation is predicted to fall with the Consumer Price Index predicted to be 1.0 per cent in 2009 compared to 3.6 per cent in 2008. The Retail Price Index is expected to fall to -2.9 per cent in 2009 compared with +4.0 per cent in 2008, which may affect pensions and wage negotiations.

* Unemployment will increase to 2.59 million in 2009 and hitting 3.00 million people in 2010.

* Average earnings will increase at a smaller rate, with earning including bonuses increasing by 1.7 per cent in 2009 compared to 3.5 per cent in 2008.