UK Officially In A Recession

[Lee]

Britain has tumbled into its worst recession since 1980 when the country was grappling with high unemployment in the Thatcher era.

Official confirmation came with figures from the Office for National Statistics showing the economy shrank by 1.5pc in the final three months of 2008.

That was the sharpest three-month contraction since gross domestic product fell by 1.8pc in the second quarter of 1980. It follows a 0.6pc fall in the third quarter of 2008, which brought an abrupt end to 64 consecutive quarters of growth in the UK.

The cumulative fall in GDP of 2.1pc in the second half of last year is also the biggest six-month drop since the first half of 1980. Economists had predicted a fourth quarter fall of 1.2pc, and reacted with dismay at the speed of the economic deterioration revealed today.

"Today’s figures are the final nail in the coffin for Prime Minister Gordon Brown’s claim to have ‘ended boom and bust’; the United Kingdom economy is most definitely bust at the moment,"said Charles Davis at the Centre for Economics and Business Research said.

"It is not just the fact that the UK has officially entered recession that will cause concern; it is the size of the contraction. This supports our view that the economy is set for the steepest contraction in the post war era in 2009, with a fall in the region of 3pc year-on-year" he said.

The manufacturing sector, which accounts for 14pc of the economy, was hit particularly hard in the fourth quarter by a 4.6pc decline in output. The services sector, which contributes three-quarters of GDP, shrank by 1pc.

However, what separates this recession from previous downturns is the way in which it has infiltrated almost all sectors, hurting businesses and consumers alike.

It began with a credit crisis in the US banking sector, took a firm hold on the UK housing and construction sectors, and has since led to the collapse of a string of well-known retailers and the highest level of unemployment since September 1997 at almost 2m.

The Government has twice bailed out the country's battered banks and the Bank of England has slashed interest rates as they together try to pull the economy back from the brink.

The hope had been that the recent weakness of sterling would help make Britain's exports more competitive. However, the downturns in Britain's key export markets - the US and Europe - has meant the boost has been negligible so far.

The pound tumbled more than 2 cents to a 23-year low and closed down almost a cent at $1.3668. The FTSE 100 at one point fell more than 1pc to below the 4,000 mark for the first time in almost two months, but closed up 24 points at 4052.47.

Stephen Gifford, chief economist at Grant Thornton, said: "Today's figures have confirmed what we have known for months that the UK is now officially in recession. Yet the sheer fall in GDP is staggering. Financial meltdown has probably been averted but the economy has now entered a recession which is sure to be as bad as the early 80s.

"UK output is likely to fall by more than 2pc in 2009 with the first signs of recovery early next year as interest rates fall close to zero to stimulate the economy and to counter deflation. But the real worry is unemployment, with the number of jobless set to rise to more than 3m by the end of 2010, it will certainly be a worrying and depressing year for many UK households."

In 1980, Mrs Thatcher and her Chancellor Geoffrey Howe confronted the recession in a very brutal way. Rather that cut taxes, they raised them, and rather than increase Government spending, they slashed it.

http://www.telegraph.co.uk/finance/f...ince-1980.html

Its actually quite scary how the US can fuck the rest of the world up like this.

I hope Brown does the same thing that Maggie did and also, i think Obama needs to raise taxes in the US to start bringing us out of recession, especially now he has vowed to cut government spending.

Regards,

Lee

[HunkyLuke]

Yeah, I saw this reported on the BBC yesterday, but I also saw that some indicators are already showing that things are not as bad as predicted. For instance, credit card sales dollars were down in Nov & Dec, but the number of transactions were the same - its just that people were getting better bargains. So the purchasing demand is still there, its just that people are bargain hunting.