runie80 wrote:Yes things are slowing down there is no doubt about it.
So far consumer spending is ok its not too bad but its slowing.
The thing to watch for is "inflation"
Council tax going up
Fuel prices going up
Food prices going up
Thats going to have an impact on spending and then cause further squeze in money supply in the market.
But its fair to say we are not out of the woods yet.
But UK is in better position than US
The financial sector is worst affected Jobs wise i am sure other sectors will be affected too.
Also interest rate decision is a close one to watch
On one side its inflation rising and on other side its slowing consumer spending
its definitely a difficult one to handle.
Says who?Gordy? He would say that, wouldn`t he? Although the debt levels are higher in the US in absolute terms, per capita debt is way higher in the UK...The UK's budget deficit for the current financial year as a percentage of the GDP is higher than even America's. The Noolab govt inherited a comfortable budget surplus when they came to power in 1997 but have managed to turn it into a record budget deficit through a decade of financial mismanagement. The trouble is that they have run up this massive budget deficit right at the top of the current financial cycle, leaving the economy highly exposed to the looming economic downturn. Simply put, Broon and co failed to save money during the boom years after they collectively bought into Gordy's delusional 'no more boom and bust' pipedream. 'Real' inflation, as opposed to the govt fiddled CPI, is running at around 5% (food inflation at around 10%) which makes it difficult for the BoE to aggressively cut rates in order to keep the credit bubble going. Even if the rates are cut, banks would be less willing to pass on the cuts to their already struggling consumers as credit conditions have worsened in recent months and financial institutions have become more risk averse as a result of the subprime crisis. Average house prices in the US were 6 times earnings at their peak while they are currently 9.5 times earnings in the UK, making them vulnerable to a much more severe correction than we are currently witnessing in the US housing market. The UK has traditionally been 12-18 months behind the curve in relation to the US economy so expect the contagion from across the pond to fully hit these shores in the next year or so. Moreover, the fact that the financial sector comprises up to a quarter of the UK GDP currently is bound to make the downturn quicker and far more painful.
If you are still sceptical of my overwhelmingly pessimistic outlook on the UK economy (and most debt based Western economies in general) check this out: The greenback lost value against most major currencies, bar the South African Rand and the GBP,following the Fed's rate cut today. Its obvious that the currency markets do not have much faith in the GBP and by extension, the UK economy.However, the outlook for IT should remain fairly good in the short term as the recession is more likely to hit the UK towards the latter half of 2008 and even the most pessimistic predictions do not expect the GBP to fall below 1.80/$ in the next couple of years as the outlook for the dollar is particularly bad due to the Fed's 'Zimbabwe model of economics'. However, both currencies are likely to continue depreciating in tandem against eastern currencies like the Renminbi/Rupee and metals like gold in the near future (the pound has lost almost 15% against the rupee in the last year..expect further falls in response to BoE's rate cut next month)
