The UK’s in recession, and it’s worse than we thought.
From Reuters:
KEY FIGURES FOR PRELIMINARY Q4 GDP
Q4 08: -1.5% QQ, -1.8 YY (FCAST -1.2% QQ, -1.4 YY
Q3 08: UNCHANGED AT -0.6 QQ, 0.3 YY
The quarterly figure is the biggest since Q2 1980, while full-year GDP is the weakest since 1992.
The standout disaster was manufacturing, down 4.6 per cent on the quarter.
The view from Howard Archer, UK economist at IHS Global Insight:
The very sharp contraction in GDP in the fourth quarter of 2008, coupled with the extremely worrying outlook and ongoing serious financial sector problems, intensifies pressure on the Bank of England to take further measures to support the economy. We expect the Bank of England to cut interest rates by another 50 basis points in February, taking them down from 1.50% to a new record low of 1.00%. Further out, we expect interest rates to fall to a low of 0.25-0.50% in the second quarter of 2009 and then stay there for the rest of the year. However, it is far from inconceivable that interest rates could come all the way down to zero. In addition, Bank of England Governor Mervyn King has indicated that it will not be too long before the central bank starts to pump liquidity into the economy through buying financial assets, particularly corporate bonds.
Sterling down 2.2 per cent vs the dollar to 1.356, and dropping.
