The revised figures published by the Office of National Statistics (ONS) yesterday for the first quarter of 2011 revealed little change, they did though show that homeowners across the UK may well still be buying essentials such as fuel, energy and home insurance but they are not buying much of anything else and unfortunately the same applies to the business sector.
Consumer spending and business development both drop
The report shows that although the economy is not officially back in recession it very nearly is, the growth of just 0.05 in the first quarter of 2011 combined with the 0.05 drop in the last quarter of 2010 shows that that the economy has stood still for 6 months. This could not hide the fact that household spending in the UK dropped by 0.06 in that period and is at its lowest for 2 years.
Business investment over the same period fell by an amazing 7% but this was explained away by the fact that the last quarter of last year was particularly good because a number of high profile businessmen bought executive jets before the change in VAT. No doubt with their bank bonus!
Interest rates. Will they, won’t they?
The disappointing figures led to speculation that interest rates would now stay the same for the rest of the year. However, on the same day another think tank, the Organisation for Economic Cooperation and Development (OECD) said that, although chancellor George Osborne’s austerity budget was on the right lines he may have to dilute them otherwise he will need the Bank of England (BoE) to up interest rates sooner rather than later to stop inflation running away with the economy.
General public have no time for debate
The OECD predicted UK growth over the next two years would be somewhat below that of the predictions of the Office of Budget responsibility (OBR) and the economy would need a timely stimulus. All this of course will bypass the general public who at the moment are spending more time looking for bargains such as cheap home insurance and fuel at less than £1.40 a litre, rather than listening to politicians point scoring over the financial mess they are overseeing.
Tags: Bank of England, Consumer spending, Home Insurance, Homeowners, money, Office of National Statistics