Gloom Settles over US and UK Economies

07 March 2008

WASHINGTON:The US Federal Reserve is expected to cut interest rates yet again at its meeting later this month, in an attempt to rein back the nation's seeming gallop into recession.

The bank's Beige Book report says housing, manufacturing and retail activity have cooled since the beginning of the year, while the cost of raw materials and energy has risen.

The report, which surveys twelve regions across the US, reveals a slowdown in service industries in most areas, while manufacturing has cooled in around half of those regions.

The Fed says two-thirds of the regions are experiencing a "softening or weakening in the pace of business activity, while the others referred to subdued, slow or modest growth". 
US Treasury secretary Henry Paulson also conceded the economy had slowed "appreciably" and told a congressional committee that problems in the housing market, higher energy prices and financial market turmoil had all contributed to the slowdown.

  • Meantime, in the UK consumer confidence has fallen to its lowest level since the Nationwide building society launched its index. 
    The society said February's three point fall to 78 was the result of a slower housing market, rising food and fuel prices and economic uncertainty. Around 46% of those polled thought the economic situation would be worse in six months' time.

    The Confederation of British Industry detected some optimism among service sector firms despite this being at a 15-month low.

    Says  CBI chief economic adviser, Ian McCafferty: "The services sector is beginning to feel the slowdown under way in other parts of the economy and firms are concerned about the outlook for their business over the coming year.

    "While demand has held up for most business services firms, some in management and legal services have been hit by slower mergers and acquisitions activity."

  • Despite the gloom, the Bank of England on Thursday voted to keep interest rates on hold at 5.25%.

    Data sourced from BBC Online; additional content by WARC staff