UK Facing Recession

A recession will likely descend on Britain within the next 6 to 9 months, warned the British Chambers of Commerce recently. The national group, which reps local businesses, predicted Britain would suffer from negative, or, at best, flat, GDP growth over the next 2 to 3 quarters, meaning the UK will very likely be in the midst of a recession, technically defined as two or more consecutive quarters of shrinkage, by the beginning of 2009. But, the chambers warned, the picture could be even more dire if the Bank of England doesn't cut interest rates as soon as possible in order to stimulate spending. The recent publication of the BCC quarterly economic forecast was aptly timed, with two more studies out giving hard evidence of a looming recession. A leading London retail sales monitor, published by the British Retail Consortium, reported sales growth in central London in July slowed to 6% year-on-year, compared to last year's 13% rise over 2006 for the July. Clothing, footwear, homeware and other discretionary items were hit particularly hard by the "squeeze on household budgets," it said. Also recently, property web site Rightmove said that house prices fell nearly 5% year-on-year in August. The fall was the fastest since the company launched its monthly survey six years ago. Rightmove said the average asking price for homes fell by 2.3%, or 5,403 pounds ($1,0810), since last month. In London, the average asking price for a house dropped by 21,000 pounds ($39,000) since July to 379,162 pounds ($708,630). The survey also showed the 7th consecutive monthly rise of unsold houses on estate agents' books, leaving it with record average of 78 unsold properties on their books. The commercial director at Rightmove said that the number of completed sales this year was in danger of falling to its lowest level since 1959. The two new studies are yet more evidence, along data over the last month showing falling consumer confidence, rising inflation and contracting business growth, that Britain is indeed suffering from a economic slowdown. The Bank of England needs to cut interest rates from the current 5% to 4.75% in the 4th-Q of 2008, and to 4.5% in the 1st-Q