UK Economy: UK on the Precipice of Recession
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
London, 6 Aug 2008. The latest UK economic data from the Office for National Statistics (ONS) continues to be gloomy, and points the way to a recession could kick in this year. If the economy does contract this quarter as most analysts expect, it would be the first time it has done so since 1992.
London, 6 Aug 2008. The latest UK economic data from the Office for National Statistics (ONS) continues to be gloomy, and points the way to a recession could kick in this year. If the economy does contract this quarter as most analysts expect, it would be the first time it has done so since 1992.
Industrial output, which makes up 26% of the British economy, fell by 0.8 per cent in Q2 2008, following a 0.6 per cent drop in Q1 this year. June was the fourth straight month of decline, and the 0.5 per cent drop was also higher than expected. Construction alone fell by 0.7 per cent, with manufacturing output down by 0.4 per cent.
The Chartered Institute for Purchasing and Supply (Cips) added to the gloom around the services sector, which accounts for 73% of the UK economy. Cips’ Purchasing Managers Index (PMI) is generally acknowledged as the leading indicator for services demand. It has stayed below 50 for the last three months, indicating contracting demand. The only silver lining was a slight rise from 47.1 in June to 47.4 in July.
The ONS has estimated that UK GDP in Q2 2008 has grown 0.2 per cent but this figure is likely to be revised down once the full effects of the June slow down are calculated.
Meanwhile the Nationwide Consumer Confidence Index (CCI) saw its biggest recorded fall in July. It has dropped a whopping 48 per cent since 2007, with an 18 per cent drop from June to July this year alone. There has been bad news on pretty much all fronts for consumers, with the exception of some reductions in petrol prices and fixed-rate mortgages.
All the bad news is heaping more trouble on the Labour government and its beleaguered leader Gordon Brown. A recent Independent ‘Poll of Polls’ has shown that Labour is at its most unpopular since 1935, with just 27 per cent of the electorate supporting them. News that Northern Rock, the lender that Brown nationalized to avoid bankruptcy, would require a GBP3.4 billion taxpayer loan converted to equity (and effectively written off) would not have helped.
Jenny MacGraw, EconomyWatch.com
