Double dip risk grows

Published:  01 October, 2010

UK: The risk that the economy may contract increased yesterday with the release of further evidence suggesting that the economy is slowing down.

June's fall in service sector activity comprising about 70% of economic activity, subdued mortgage approvals, and depressed consumer confidence point to third-quarter economic growth below that seen so far this year. The figure will be published on 26 October.

The Office for National Statistics said that activity in the service sector contracted by 0.2% in June, the third-successive month in decline. The weakness in the economy this time last year, however, means that output is still up by 1.2% on July 2009, the sixth consecutive month of improvement.

But, the NOP/GfK Consumer Confidence Index decreased by two points in September to minus 20, meaning that a net 20% of households believe that their personal financial situation will deteriorate over the next year.

Loss of confidence is affecting to the housing market. The Bank of England reported new mortgage approvals of 47 372 in August, slightly lower than July and although in line with expectations still well below that needed to underpin a healthy market. City commentators predict a 10% fall in property values over the next year.

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