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Submitted by stevein7 on Mon, 2008-07-21 12:56

UK ‘set for economic horror movie’

The UK is heading for an economic “horror movie” and will struggle to avoid recession next year, an influential think tank claimed.

Ernst & Young’s ITEM Club is forecasting GDP growth of 1% next year, inflation to remain above the Government’s target for the next 12 months and a “substantial” increase in unemployment.

The group also predicts that consumer spending will nearly slow to a standstill in 2009, rising by just 0.2% as households wrestle with rising inflation, lower credit availability and a sharp reversal in the housing market.

ITEM’s chief economist Peter Spencer said: “Both on the high street and in the housing market it is going to get a great deal worse before it gets better.

“We have already seen a housing crisis that has morphed from a credit crunch to a general collapse in confidence as prices have tumbled.”

He added: “Consumers will inevitably cut back on non-essential spending in the face of the impact of rising food and energy prices on their discretionary incomes. Many parts of the leisure sector will be particularly hard hit.”

The report comes after the Chancellor Alistair Darling revealed in an interview that the UK downturn would be more “profound” and last longer than he expected.

Sir Win Bischoff, the chairman of the world’s biggest bank Citigroup, also said he believes house prices in Britain and America will keep falling for another two years.

ITEM said with little sign of any loosening in the credit markets, it expected house prices to drop by about 10% through 2008 and a further 6% through 2009. There will be a much greater fall in the number of houses being sold, it added, with volumes down about 35% this year and 10% the next and “all the usual effects on the associated expenditures”.

Mr Spencer said: “It is worth emphasising…that the correction in house prices is likely to be far greater outside London.”

http://money.aol.co.uk/money-news/uk-set-for-economic-horror-movie/article/20080720191802848284607

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Retail sales suffer biggest slump

Submitted by stevein7 on Thu, 2008-07-24 22:31.

Retail sales suffer biggest slump

A consumer spending slowdown has looked to have returned with a vengeance after official figures showed retail sales last month suffered their biggest slump for more than 20 years.

The Office for National Statistics said the retail sales volumes fell 3.9% between May and June, the largest decrease since records began in January 1986. It followed a 3.5% sunny-weather inspired sales leap seen the previous month.

Clothing and footwear shops were the worst hit in June, with sales down 6.9%. Food sales also fell 3.6%, the biggest drop since record began.

Economists had been expecting a fall in sales volumes of around 3% last month, following May’s shock 3.5% rise.

Consumers have been battling with soaring fuel and energy costs this year, as well as rampant food inflation. Non-food stores as a whole suffered a 4.5% sales drop between May and June, the ONS said, which was the biggest fall on record.

Sales volumes at household goods stores, which includes furniture and electrical goods sellers, fell 5%, the biggest slump since April 1991 when Britain was in the grip of the last recession.

Retail giant Marks and Spencer has notably been experiencing a sales slowdown in recent months, warning earlier this month that like-for-like sales fell 5.3% during the quarter to June 28.

Total retail sales volumes rose 2.2% in June compared to the year before, the ONS data showed, the lowest rise since February 2006.

Average weekly value of sales in June came in at £5.1 billion, 3.4% higher than the previous year.

The ONS data highlighted the impact of food inflation, with June’s price deflator, which measures the annual change in price in the retail sector, rising to plus 0.5%.

http://money.aol.co.uk/retail-sales-suffer-biggest-slump/article/20080724053735828890613