First the beginnings of the rise in unemployment, followed by the depressingly downbeat assessment by the Bank of England of what’s in store for us. But the Bank is at it, just like the political class, dodging its own responsibility for the crisis. For the plain fact is that for the last 10 years the authorities in the shape of Gordon Brown as Chancellor and the Bank itself have lost control of credit, enabling massive over-borrowing which is the prime constituent of the depth of the crisis we face. xxxxxxxxxxxx cs ================== BBC ONLINE 13.8.08 Jobless total up as economy slows Growth in average earnings has fallen as unemployment has risen The number of people out of work rose by 60,000 in the three months to June, taking the official unemployment rate to 5.4%, official figures showed. The Office for National Statistics (ONS) said unemployment increased to 1.67 million between April and June. The data suggests that a slowing economy is taking its toll on the labour market. The ONS also said the number of people claiming jobless benefits in July rose by 20,100 to 846,700. This was sixth consecutive rise in the claimant count and the biggest jump since 1992. Deterioration George Buckley, an economist at Deutsche Bank, said the labour market was deteriorating at a rapid pace. "I think it's going to continue to do so because of slower economic growth and concerns by companies that the downturn might actually be longer and more pronounced than they originally thought." Average earnings in the three-month period grew at an annual pace of 3.4%, down from 3.8% in the previous period and the weakest rise since August 2003. This could ease fears about soaring inflation, which stood at 4.4% in July, and lessen the likelihood of an interest rate rise to contain price rises. "The good news is that reports such as this limit the risk of an interest rate hike and bring forward the likely timing of the first interest rate cut," said Alan Clarke, an economist at BNP Paribas. On Tuesday, the ONS reported that consumer price inflation had reached 4.4% in August, more than twice the government's target figure, while retail price inflation, often used for setting wages and benefits, was 5%. ==================== THE TIMES 13.8.08 Britons must brace for a year of economic pain Gary Duncan, Grainne Gilmore The Bank of England's Governor braced Britain for a year of economic pain today, admitting that there is a real threat of recession, with growth set to grind to a halt and inflation likely to peak at about 5 per cent during the autumn. In a stark message, Meryvn King left little doubt that tough times lie ahead as the Bank sharply cut its forecast for growth this year and next while predicting sharply higher inflation in the short-term, spelling further financial stress for families. "The next year will be a difficult one, with inflation high and output broadly flat," Mr King said. "The British economy is going through a difficult and painful adjustment." The Bank's latest quarterly Inflation Report today made clear that it sees little scope for any early interest rate cuts to help shore-up the rapidly weakening economy. Soaring food and energy prices are set to drive inflation up from last month's 16-year high of 4.4 per cent, more than double the Bank's 2 per cent target, to a peak of about 5 per cent in the next few months. But the Bank also eased fears over the threat that it could be forced to raise rates, and hinted at the chance of eventual cuts around the end of the year, as it predicted that inflation is set to fall very sharply from its autumn peak to drop under the 2 per cent target in two years' time, and then continue to decline. City economists said that the Bank's latest forecasts pointed to interest rates remaining on hold for the moment, but said there was a chance that they could fall before Christmas. The more doveish than expected assessment of prospects from the Bank, led financial markets to move quickly to increase betting on the chance of a rate cut before the end of the year. Rising hopes over eventual rate cuts also triggered a fall in the pound. "The tone is clearly doveish, with the economy now expected broadly to stagnate over the next year or so," Jonathan Loynes, of Capital Economics, said. The steep drop in inflation forecast by the Bank from the end of this year is driven by the severity of the downturn that it now expects Britain to suffer. The economy is expect to stagnate for much of the coming year, with the annual pace of GDP growth dropping to zero, and a clear danger of an even worse outcome. Mr King conceded that the economy could slide into technical recession, with the economic output falling for two or more consecutive quarters, over the coming year. "I think with broadly flat output, it's bound to be the case that there is a possibility of a quarter or two of negative growth," [‘negative growth], is economist speak for ‘decline’ -cs] he said. The Governor was blunt about the rough ride that many households will face over the coming year as the financial squeeze from rising food and energy bills grows still worse. Families' incomes would grow only very weakly, and for some spending power would fall, leading to a further slowdown in consumer spending. At the same time, he said that the economy would also continue to be blighted by the continuing credit crunch, the slump in the housing market, and anaemic investment activity by businesses. Mr King said that Britain's economy had been hit by a unique combination of shocks from the leap in energy and commodity prices alongside credit crunch, which he called "the biggest financial dislocation since the Second World War". "The combination of these two shocks, which have originated primarily in the rest of the world economy [the credit crunch is essentialy due to the government’s and the bank’s failure toi control credit here in Britain leading to massive over-borrowing. -cs] , have meant that life is extremely difficult and will be for the UK economy over the next year," he said. The Bank's forecasts today suggest that the economy will grow this year by only about 1.5 per cent - below the 1.75 per cent minimum presently projected by the Chancellor. Next year, the Bank sees even weaker growth of just 0.75 per cent - compared with Alistair Darling's existing forecast for a recovery to bring growth of 2.25 to 2.75 per cent. On its main forecast, the Bank expects the worst of the economy's slowdown to run from the present quarter until the end of the second quarter of next year, with growth close to zero throughout this stretch of stagnation, and only resuming next autumn.
Wednesday, 13 August 2008
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