Predicted negative hard data filters through
24 Nov 07

Data is now starting to come through to reveal the slowdown in GDP growth of the UK - it did not grow as fast as the ONS had expected. In Q3, GDP expanded by 0.7% compared to their previous estimate of 0.8%.

Additionally, figures from the housing market show that banks have begun to put brakes on the mortgage lending. In October, 44,000 mortgages had been issued by the British Bankers Association member banks, which is down from 54,000 in September and 70,000 a year earlier.

This negative news is starting to back up our decision to cut rates by 0.25% at the Bank of England's Target 2.0 competition on Thursday.

In my conclusion I said that while it may be reasonable to wait for more hard data to show the slowdown in the economy, there were already some signs that the UK was heading into a "tricky period" as described by Rachel Lomax, the deputy governor of the Bank of England. Already, this hard data seems to be filtering through making our decision to cut rates in December look wise.

I will be keeping a watch in the next few weeks to see more data come through to show that a rate cut is needed in December.

To prove how reliant the UK economy is on business services and finance, it is interesting to note that of the 0.7% growth in Q3, 0.4% came from business and finance alone. This can show how vulnerable the economy is to the global credit squeeze.

Links:
Foul weather ahead as growth slows - The FT (24 Nov 07)