Consumer spending takes a nosedive |
|
|
Published
:
Fri, 25 Mar 2005 01:00
|
The Bank of England recently made it clear that there won’t be any hike in interest rates, not at least before the general election, citing weakness in consumer spending.
Although Bank’s monetary policy committee had mentioned a downslide in consumer spending inflation report, this turned out to be much weaker than expected, said the Bank’s governor Mervyn King.
| The remarks by the governor and other government bodies, economists say, only indicate that the Bank will hold on to the interest hike till or even after the general election.
"Indeed, the main conclusion is that an interest rate hike is unlikely to happen as soon as April,” said Global Insight economist Howard Archer.
The latest data shows retail sales slipping downwards, housing market settling down and car sales applying brakes. In fact the Office for National Statistics (ONS) this week made changes to its fourth-quarter GDP for consumer spending - the weakest level for the last two years.
The Bank had actually started increasing rates on borrowing in November 2003 by 3.5 per cent and kept on increasing them till it reached 4.75 per cent last August, after which it suddenly stopped and since than has remained unchanged.
Despite oil prices sky-rocketing in the last two years and other commodity prices touching more than a decade high, there was no sign of these costs being put on to the consumer, economists said.
The Bank meanwhile was worried that the tight labour market could pose an inflationary threat and that it needed to keep an eye on the wage packets. But it also said they had no clue as to why the wage inflation was subdued, even though employment levels were the highest.
Economists, however, believe the slowdown in consumer spending is temporary and that one should not react to short-term statistics.
|
|
|
|
|
|
Print this Story
