UK already in recession - Bank of England

The Bank of England says the UK entered a recession in the middle of 2008 which will continue through 2009. In its quarterly inflation report, the Bank warns that the economic landscape has changed dramatically since August. It now expects inflation to decline to 1% by 2010, below its 2% target, in a dramatic change to its last forecast. This could open the way for further interest rate cuts if the Bank is to maintain inflation at its target rate in two years' time. "We are certainly prepared to cut bank rate again if that becomes necessary," said Mervyn King, the Bank of England's governor.

UK consumers plan to spend 7% less this Christmas than they did last year, a survey from business advisory group Deloitte has suggested. Deloitte warned this festive season may be "one of the toughest in decades" for retailers. The expected fall compares with a 7% rise in spending in 2007. (BBC News)

Haven't we got the message yet?

The Bank of England governor and an influential think tank have predicted that the UK economy is likely to sink into recession in 2009. Mervyn King told business leaders in Leeds he was concerned about rising unemployment and falling house prices. Economic fears sent the pound plunging to a five-year low against the dollar. Meanwhile, the National Institute of Economic and Social Research says the UK is on the brink of its first full year of recession since 1991. The Bank of England has also been criticised for being too slow to cut interest rates in response to the UK's worsening economic situation.

Link to BBC News - includes a short video clip of Mervyn King's statement.

Also, see the set of charts that Geoff Riley has put together on tutor2u blog entitled 'In the Long Run'. Think about the impact of short run fluctuations against long run trends. (Link)