Taking the plunge
The current economy of the country can be terribly misleading for most people this day and age, you look at it one way and it all seems a smooth, steady progress in which Britain seems to be flourishing, and then on the other hand you hear the papers talking of a horrifying rollercoaster which will ultimately end in total economic breakdown!
On the good side inflation seems subdued, interest rates look like staying on hold after the Monetary Policy Committee (MPC) meets this week, and most forecasters think growth will be steady if unspectacular.
Mervyn King, governor of the Bank of England, will probably present a relatively optimistic diagnosis of Britain’s economy when he presents the Bank of England’s closely-watched Inflation Report next week. This begs the question, are the warnings of consumer meltdown and a serious economic slump wrong?
It would be fair to say that Britain and Britons are not going to change their habits overnight, so no free fall of the economic path is likely, but a few recent events may indicate that a dip in the current form may be approaching. News came out that consumer spending had not bounced back quite as convincingly as the more optimistic of us thought. We looked at last years figures which compared favourably and claimed that this was a sign that the high street slowdown had all but ended.
However this seems, unfortunately, due to the fact retailers introduced massive discounts resulting in uncharacteristic spending during December. Thanks to recent FSA rules about early reporting on Christmas trading traders are desperate to avoid profit warnings.
Another short term boost was last years drop of a quarter of a per cent on interest rates, which did breathe a bit of life into the slowing mortgage market, but last months record bankruptcy numbers show that the threat of debt is greater then ever. This is to be expected though, economic logic would state we must pay for our licentiousness; we are no way near repaying our 10 years of debt.
The one thing which is predictable, is the unpredictability of our turbulent economy, we must take the rough with the smooth and any small upturn does not mean total resurgence, the journey down is only just starting.
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