Britain’s second-quarter GDP growth was precisely zero, reflecting the country’s weakest performance since the recession of the early 1990s.
With growth in the services and manufacturing sectors equalling the dismal figures of 2005 and interest rate futures rising, it’s a double whammy, hitting both our pockets and, some would say, our morale.
At the same time, inflation currently stands at more than twice the central bank’s 2 percent target, hampering the Bank of England’s ability to boost growth by bringing down interest rates.
Most analysts do expect it to cut rates and some predict a move before Christmas. Others say it will have to wait longer.
Do you think the Bank needs to act sooner to prevent a full-blown recession of two quarters of negative growth? Just how bad do you think the economic slowdown will be?
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20 comments so far
This is a very pressing question and one that needs to be answered soon. I’m very worried about where the economy is going, the UK scenario doesn’t look very bright at the moment. For each of us, this means not only cutting down household costs but also dealing with psychologically feeling depressed about the future.
- Posted by Michelle NewmanThe government is in the wrong hands. What has Gordon Brown proved to us? Exactly what has he done to help counter inflation? Instead, we’re headed towards a proper recession with high inflation, lower employment. Very distressing and going to cause sleepless nights for many.
- Posted by KarlDeep recession.
- Posted by MatthewEconomies move in waves, following a cycle. When ‘bad weather’ approaches, it helps to have a wise Captain who can steer a new course. As for Team GB - Gordon Brown & New Labour Buddies - by denying the public a chance to replace their captain, and then having that sage old Captain dominating the steering into an obvious storm, one can only project the worst onto an otherwise perfectly normal downturn. The economy has a had a boom, it doesn’t need to go bust or sink into a nasty recession, but with a stubborn die-hard Labour Gang at the helm, all I can say is this: Every democratic country gets the government they deserve.
- Posted by Simon DrakeGordon Brown is failing us in his so-called attempts to save the economy. It may not be totally fair to put all the blame on one person’s shoulder, but we cant stand for the way he’s handling it either. Why on earth wont he step down? This fear is very real and totally justified, yes we are headed to a recession. All I can say, hold on for your lives.
- Posted by Natalia KThis Government plus Mernyn King have got it completly wrong and just step back from the propblems, saying world problem, if I was to run a business the way Brown,Darling and King I would have been bankrupt years ago. Darling hints at Stamp Duty holiday and then backs off scuppering the housing market and all that work in it. We need the public to make the government realise that they were voted in and we now need to vote them out before any more damage is done with peoples lives or dont they care about us mere mortals.
- Posted by DesThe coming recession is the inevitable sequal to a boom.
- Posted by Mr Parker-ListerJust like the housing cycle the only way now is down.
The economy is in major trouble and we’re heading towards a recession for sure. Shivangni puts it accurately with the statement abt the double hit - it’s going to hit our bank balances but more crucially, it will hurt our overall morale. Sad,sad situation.
- Posted by AdamThese are scary times. I am a foreigner living in the UK and Im wondering if moving here 6 mths ago was the right thing to do. Who knows if I’ll even have a job next yr, and now I def wont be able to afford living here if costs keep increasing the way they are.
- Posted by Lee YWe need to get brown out of the picture, and fast. he’s nothing but a problem, and if we need to find a solution, he has to be removed from the equation.
- Posted by anushaIf 2 million people were ‘angry’ enough to protest against the Iraq War, why are people so feeble to march on Number 10? By the time Brown is voted out (or in again, you never know in the UK where the class war reigns supreme) it could be too late.
- Posted by Simon DrakeThis looming recession is fast becoming reality and we are all vulnerable. At a time like this we need strong leadership and sound business decisions but where are our decision makers? A country with nobody prepared to take control is doomed to financial and emotional bancrupcy.
- Posted by MaggieAs a small business owner in the service industry I have seen the recession begin to wash over us with incresing numbers of my customers defaulting on cash payments, cancelling direct debits and flat out cancelling my services.
- Posted by John WalkerI have also seen this lead to bad domestics, assault and witnessed many balifs,police and debt recovery agencys going in to establishments more and more and am having to fight to reclaim MY equipment from security holding companys etc.
It is very depressing to drive round a number of sites and see this going on in a very real way
This a global problem goverments need to be ready to adjust spending avoid oil dependancy. Find energy alternatives and lower rates
- Posted by AlThe BoE should not cut interest rates until inflation is back in the 2-3% range. The current problems have been caused by a glut of cheap money from the banks and irresponsible spending by the government. Cutting rates before inflation is squeezed out of the system is simply extending the problem further than it need go.
An economy which has been distorted by cheap money needs a period of retrenchment (a recession) in which asset prices (whether houses, shares or other goods) return to their real values in relation to individual and national earnings. “Boosting growth” (ie printing more money and handing it out at cheap rates) at such times is economic nonsense.
The problems of inflation and economic slowdown are worldwide. The UK is poorly equipped to deal with them because it is wholly exposed to the world economy and its financial reserves (which in a recession would normally be used to provide jobs via government-sponsored infrastructure projects) have been squandered on non-productive foreign wars and social spending projects which are an unsustainable drain on the economy.
Provided that the money supply is strictly controlled, the recession will last for approx one year from now. Individuals would be well advised to avoid taking on debt; to live within their means and to save money into deposit accounts which will in due course find its way back into the economy as loans to the businesses which will lead the country back into growth. The best thing the government can do is cut back dramatically on its wasteful spending and resist the temptation to interfere with the natural process of recession followed by recovery funded by real money.
- Posted by MikeThe downturn will serve as a useful and necessary process of checks and balances.
The economy will come back, but people would have learned to respect money and the food they buy.
That is a wholly good and desirable thing!
- Posted by The Truth Is...Downwards for sure. We’re hurtling to a recession and the government isn’t doing a thing to stop it. I for one am quite nervous about how far my pound will go now.
- Posted by alex kThis blog hits the nail on the head when the author says that the effects are going to be felt not only on our purchasing power, but also our mindsets. The state of affairs is just depressing and if it’s going to get worse, then we’re going to see a surge in people seeking counselling to keep peace of mind intact. What is especially going to happen to the aged, the already penniless and the low-income man who has to support a family of 4?
- Posted by RyanThe economy is running on low steam and im horrified at what awaits us in the future if the current state is a warning of times to come.
- Posted by MichelleWe are moving towards a recession if not already tipping into it. Consumer confidence is at a low, and each new day we see new reports in the press about weak statistics and failing sectors. Makes me want to leave the country and head somewhere that gives me better value for money.
- Posted by Alicia