In the wake of the US financial crisis, bad unemployment news and a slowing housing market comes even more disheartening news for the UK as independent economists have downgraded their forecasts for the economy. The monthly survey of some 30 institutions indicated that the average forecast for economic growth for 2009 is a paltry 0.3%. That is down from 0.8% in August and 1.1% in July.
The survey was taken early in September, prior to the shocking news from Wall Street, so next month’s numbers are likely to be even lower. The Office of National Statistics also revised its estimate for second quarter growth to zero and many economists believe that there will be a contraction in the second half of 2008.
This cheerful news comes on top of the latest inflation report. The annual rate of UK inflation rose to 4.7% in August, up from 4.4% the previous month and it is now at a 16 year high. The government has set 2% as the target inflation rate for the year, but it seems unlikely that it will be met. The major factors that contributed to the rise in August were food and fuel costs. Fortunately, petrol prices seem to have peaked earlier in the summer and prices have been dropping, which could lead to decreased prices the rest of the year. It will interest to see how the year shapes out for all investors.
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