“(It) is much sharper than expected,” says Lena Komileva, head of G-7 market economics at Tullett Prebon. She was talking about the UK economic slowdown, but these days she could have been speaking about the decline in any number of entities, including but not limited to Sony (NYSE: SNE), Microsoft (Nasdaq: MSFT), Citigroup (NYSE: C), and Bank of America (NYSE: BAC).
When it comes to the British economy, they were wrong by 0.3%. As I said in an earlier blog today, everybody already knew that the UK was destined for recession, in fact so much that they were largely even saying they were already in one. But while they originally predicted that gross domestic product would fall 1.2%, the damage actually came to 1.5%.
The originally predicted bad news would have sent the pound tumbling, but the reality brought it down even harder. One British pound is now worth a mere $1.37564 or €1.05928. Whereas it actually did worse against the euro just recently as currencies fluctuated wildly in a round of “Who Has The Worst Economic News?” this is the first time since September 1985 that the £ and the $ have been so close.
Forget A Plan; How About A Daily Dose Of Confidence?
Just like every other troubled economy out there, including the U.S., larger Eurozone (minus Germany so far) and China, the UK isn’t taking the bad news lying down. Prime Minister Gordon Brown says that he and his are utilizing every available option to bring the economy back around again.
That’s a trying task though, as we in the U.S. are all too aware. The last time the UK saw such negative growth so quickly was back in 1980. “We are building the foundation stones of a recovery plan,” Brown told BBC Radio 4 earlier today. “You need coordinated international action to deal with the global banking problems.”
However, the opposing party view says the real problem is the absence of “public confidence in policy and international confidence.” And deserved or not, that confidence is likely to tank even further if economists are right about their predictions for 2009… or even worse, if they’re wrong and it’s worse. The European Commission forecasts that the UK economy could contract a total of 2.8% in all this year, the most since 1946 right after Britain was emerging from World War II.
Friday, January 23, 2009 - by Jeannette Di Louie, Assistant Editor of Mt. Vernon Research
