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Economy heads for recession as growth slumps

Sean O’Grady
London Independent [1]
Friday, July 25, 2008

After years of boom, official figures on the economy published today will show that growth has slumped to nearly zero, leaving the nation already in, or close to, recession.

The Office for National Statistics figures for growth during the second quarter of this year are forecast to show a rise of between zero and 0.3 per cent on the first three months of 2008. That would push the average annual growth in the economy down from 2.3 per cent to about 1.6 per cent – the sharpest deceleration since 1995.

Yesterday, the deputy governor of the Bank of England, Charlie Bean, warned that “there is a risk that the credit crunch leads to a deeper and more prolonged slowdown”.

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Especially bad retail sales figures for June, after a freakishly good showing the previous month, confirm the dismal picture emerging from the high street as household budgets are tightened and confidence evaporates. Sales were down 3.9 per cent on the month – the worst figure since the series began in 1986.

The only bright spot is exports, helped by a massive 12 per cent depreciation in the value of sterling since last summer. But that will not be enough to save the economy from further woe, as consumption, investment, the housing market and the public finances are all set to worsen. Unemployment is already increasing, a critical factor in preserving consumer confidence.

Full article here [1]