Darker economic clouds are gathering over Britain ...
Last week, official stats told us that the UK economy grew about 3% in the twelve months to the end of June.
Sounds comforting. But remember, that was before the credit crunch started and stock markets began falling.
So what's changed in the last two months?
And how does the future look now?
Today, Nationwide published its house price survey and the Bank of England revealed the latest figures for mortgage approvals. Ed Bowsher has written about these separately under House Prices Look Fragile.
So I'll concentrate on other matters. Specifically, three danger signs for Britain's economy. And a couple more from Stateside ...
1) Growth gyrations
Where did almost half of that above mentioned UK growth originate? Answer: The City of London.
The Office for National Statistics recently reported that financial service sector output leaped by 10.5% in the 12 months to the end of June, the highest growth rate for 20 years.
But now the City could see bonuses slashed and even jobs being cut because of the ongoing turbulence, and some heavy losses, in stock and credit markets. This would clearly have a knock-on effect on the overall economy, particularly in the South East of England.
2) Business belief bombing
UK business confidence is at its weakest since November 2005 following a sharp August fall. The BDO Stoy Hayward "Optimism Index", which measures confidence over the next six months, dropped to 101.2 in August from 101.9 in July, continuing the downward trend seen since last summer.
BDO said the decline was widespread, with all business sizes and both manufacturing and service sectors seeing falls in their respective indices.
Although the overall index remains above the key 100 level, meaning some growth is still anticipated, a further decline is expected next month due to tightening credit conditions.
3) Retail retreat
UK retailers' sales growth fell in August to its slowest rate since November 2006, according to today's Confederation of British Industry trade survey.
The number of shoppers entering retail outlets across the UK had previously dropped 1% in July.
Retailers look to have suffered one of the poorest August bank holidays for years, according to retail expert SPSL, who have just suggested that sales over the important ‘end summer break' were down by 2% on a year ago.
Recent downbeat trading statements from JJB Sports
(LSE: JJB)
, Sports Direct
(LSE: SPD)
and Dobbies
(LSE: DGC)
, the garden centre being bought by Tesco
(LSE: TSCO)
, could soon be repeated by other retailers. Consumer electronics vendor DSG
(LSE: DSGI)
today expressed caution on the outlook as rising interest rates and slow wage growth combine to hit consumer confidence.
And over there ...
In the States, house prices are falling at a record pace. The S&P/Case-Shiller US National Home Price Index fell 3.2% last quarter from the same period in 2006, its sharpest decline since the index was created in 1987. The pace of decline accelerated from 1.6% in the first quarter.
And the data was collected only until the end of July, before the sub-prime lending crisis really hit in August and mortgage lenders tightened up their loan terms.
Meanwhile, US sales of existing homes fell 0.2% to 5.75m units in the year to July, the lowest since November 2002, said the National Association of Realtors (NAR). NAR added that the supply of unsold single family homes has now hit its highest level in 16 years, the first ever reported decline in 12 consecutive months.
Several lenders have now gone bust and the chief executive of Countrywide, the largest American mortgage lender, has warned that the downturn could lead to an economic recession.
America's Consumer Confidence Index slumped from 111.9 in July to 105.0 in August, the most since the aftermath of the Hurricane Katrina in 2005. All main components of the barometer fell, with a particularly sharp decline in the ‘forward expectations' component.
The survey reflected not only housing market woes but also declining optimism over job prospects.
Will we see what happening in the States repeated over here? Hope not, but can't be certain we won't.
Is an economic slowdown on the way for the UK? Sure looks like it.
More: Two Tier Britain | Is The Crisis Over?
