Further Economic Slowdown Expected
During the course of the last twelve months, we have seen a continued slow down in the UK economy as a result of the credit crunch, rising costs of basic commodities and falling consumer confidence.
The question on everyone’s lips is when are we going to see an improvement in the situation, with things getting back to normal? According to the Confederation of British Industry (CBI) not for some time yet, their latest report on the UK economy, published this week, is forecasting that the UK gross domestic product (GDP) growth is likely to slow to 1.3 percent next year, the lowest rate of growth in seventeen years.
The CBI said that consumer spending had already slowed considerably this year and this trend is likely to continue through the rest of the year and into 2009. They also predict that inflation will continue to rise through 2008, due to the rising cost of basic items such as fuel and food and this is likely to peak at 3.8% in the third quarter of the year.
This rate is considerably higher than the Governments target rate of inflation of only 2% and the CBI expects the rate to remain in excess of 3% until March 2009, although it should hopefully start to reduce towards the back end of this year.
As a result of this outlook, it seems unlikely that the Bank of England will make any further interest rate cuts during the course of this year, which is bad news for all those individuals who are struggling to keep up with the payments on their loans and mortgages. However, it is predicted that as inflation reduces next year, there will be room for the Bank of England to reduce interest rates to 4.5% by the summer of 2009 and hopefully lenders will pass these savings onto their loan and mortgage customers.
