Recession looming/ interest rates to fall...

[peterjhale]

Well after all our discussions on the election, it would appear the UK is about to enter a recession --- great !

Here's the facts from Business Europe

In the wake of figures released yesterday showing declines in both retail sales and factory production most experts agree the chances of the Bank of England (BoE) hiking up interest rates this month is unlikely. Some suggest the base rate may decrease in the near future.

The manufacturing contraction, which dropped below the 50.0 neutral mark for the first time in two years, stemmed from sharp drops in new orders because of weaker export demand and news of the recent MG Rover collapse.

UK firms, however, also cited weaker demand from the eurozone and stronger competition from east Asian producers, the Chartered Institute of Purchasing and Supply (CIPS) found.

Meanwhile, retailers were dealt the biggest fall in April sales since the early 1990s, when Britain was in recession.

The BoE's monetary policy committee (MPC) is expected to leave interest rates at 4.75% for the ninth consecutive month it meets this week, but experts say the disappointing economic figures shine a greater light on an economy rapidly losing its prior momentum.

[JamesS]

I'm not expecting rates to go up, down would be the trend. I'd say rates will go down well before Christmas. Doesn’t affect me personally either way though, I'm not a homeowner and I don’t have any significant savings. From what I read, its inflation the Bank of England doesn’t want to get above 2%. Originally the rate changes were to cool down the housing market, bring it down gradually.

I’ve been hearing finance firms predicting 500k job losses in the UK in 2006. But its not just Britain, France is expecting unemployment to rise, we all know Germany is struggling with unemployment.

America’s figures out today see something like 200k jobs created over the last quarter, but all the time we're hearing job losses here, there and everywhere. Bankruptcies in England and Wales are 24.5% higher than last year (http://news.bbc.co.uk/1/hi/business/4520973.stm).

People in this country have £1trillion of personal debt, so we hear on the media everyone needs to stop spending and start saving, so we do, and then we hear groaning over a recession. People simply don’t have any money to spend in retail shops without getting in further debt.

Saying that, me, my partner and her Mum had a good shop last weekend in Watford :P

[Leasinoptions]

I agree I think we’re in for a tough year.

High Street sales are poor - a sure sign that people are reining in spending, and the housing market is slowing.

Banks are once again guilty of over extending customers and giving loans to people who cannot afford them.

The pound is far too strong, widening the trade gap in goods and services and causing manufacturing to slow down. We’ve already seen Rover fall and major job cuts at IBM & Marconi. If the banks call in overdrafts like they did in the 80’s and 90’s I’m sure a lot companies will close and more jobs will go.

Oil prices remain high – great news for oil companies and the government – bad news for industry and the man on the street.

Its pretty gloomy outlook but we’ve seen it all before.

Onwards and upwards. This too will pass.


Aron Stevenson

[I, Brian]

I see interest rates being forced up - the high oil prices are going to keep pressuring inflation, and although lots of companies have tried to absorb the extra energy costs in case they were short term, the prediction is that high oil prices are here to stay. That means manufacturing is going to be force to start increasing prices to account for this, which causes a specific inflationary pressure.

The Bank of England's key remit is to keep inflation down - that means that if inflation is going to continue to rise then at some stage the BoE is going to have to respond with rate rises.

This can only compound problems already developing within the UK economy, but it seems inevitable.

2c.

[gstock]

But on the jolly side

What about all the money that has been made by the property tyc's over the last few years. Surley there gonna want to re-invest in new projects. possibly investing in new starters and hopefully uk manufactoring. I have a friend who turned 80 thou into 500 thou in the last 5 year in property development and he says himself the game is up.

Graham

[inbakumar]

Originally Posted by Leasinoptions

I agree I think we’re in for a tough year.

Banks are once again guilty of over extending customers and giving loans to people who cannot afford them.

The pound is far too strong, widening the trade gap in goods and services and causing manufacturing to slow down. We’ve already seen Rover fall and major job cuts at IBM & Marconi. If the banks call in overdrafts like they did in the 80’s and 90’s I’m sure a lot companies will close and more jobs will go.

Oil prices remain high – great news for oil companies and the government – bad news for industry and the man on the street.

Aron Stevenson

Aron,

I sincerely hope that banks don't stop lending as it would be a catastrophe for the country as you only have to look at the recent economic performance of Japan to see the disastorous effects of a banking 'credit crunch' (it is personally not good for my business either ).

I don't think it is fair to blame the strong Pound? for the widening trade gap. If you look at the US, they have had a weak dollar for a long time but the trade gap is still widening and it is at record levels.

Yes, the fuel prices are high but we are no longer dependent on oil as we used to and therefore the effect should be manageable.

As for some specific industry examples like Rover, the problem was due to the management of the company. I recently read somewhere that Nissan of Japan sold over 1 million cars in US alone last year (made record profits too) and recently they have to shut the plants in Japan because the steel companies there couldn't supply enough steel to make cars!

At the end of the day, we got to understand that we live in a highly complex global environment. No single factor is going to determine the direction of the world economy and UK is only a small constituent of it. Change and unpredictability should be part of any business decision-making process and the ones that can plan ahead for turbulence will survive but others would fall by the wayside. I hope the Teneric forum members are better prepared than others.

Regards,

[inbakumar]

Interest rate cut signalled by the Bank of England after slump on high street.

I came across this today, which I thought would be useful to this thread.

http://www.timesonline.co.uk/article...608750,00.html



Regards

[peterjhale]

Yep, everyone voted for this....


Retail sales slump
House prices down
Manufacturing down
Consumer debt up

Ho hum...

Time to squirrel away some money for the increase in taxes that is coming our way to support this..

[www.t6c.co.uk]

I am really concerned for the UK economy over the next 6 to 9 years.

I have already started moving my time to other areas, away from helping retail firms increase business to helping companies reduce costs.

[sarsara]

Originally Posted by gstock

But on the jolly side

....he says himself the game is up.

Graham

Not in Northern Ireland where the whole country is rapidly going under concrete with an uncontrolled nationwide housing and shopping boom.