Do we face slowdown or meltdown?

Article Abstract:

The financial markets seem to believe that the Bank of England Monetary Policy Committee's decision to reduce interest rates will be sufficient to ensure that a serious economic slump does not take place. However, the leading indicators of economic activity present a more pessimistic picture, with business and consumer confidence declining. It is possible that economic indicators exaggerate business and consumer pessimism, and it seems reasonable to assume that the prospects for the economy are not as poor as the Confederation of British Industry's Industrial Trends Survey initially indicates.

Comment:

Has reduced interest rates to avert serious economic slump

United Kingdom, Commercial Banks, Commercial Banking, Consumer prices, Management, Bank of England

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Expect things to get worse before they get better

Article Abstract:

Private sector economists now forecast that the UK will see economic growth of between 0.5% and 1% in 1999. This will probably lead to unemployment rising by around 500,000, but will be a much better ending to a period of strong growth since the early 1990s than had been widely anticipated. Confidence is relatively low, particularly among businesses, and short-term lead indicators show that output could fall in the early part of 1999. However, further falls in base rates would prompt an upturn.

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Why indicators are a matter of confidence

Article Abstract:

It will important to pay close attention to indicators of consumer and industrial opinion in the UK in the near future. Changes in consumer and industrial opinion provide valuable indications of how hard a landing the economy may experience and how soon interest rates are likely to fall. It is likely that there will be a significant slowdown in consumer spending in the second half of 1998 as consumers respond to higher base rates and a slowdown in the rate at which unemployment is declining.

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