UK economy: Spending slumps as does manufacturing output

10th June 2011

Firstly, as reported on The Guardian website UK manufacturing output dropped at its fastest pace for more than two years in Apri 2011.

Analysts had expected April's figures to be worse as a result of the royal wedding bank holiday and the knock-on effects of industrial shut-downs in Japan.

However the Office for National Statistics data which showed a 1.5% decline in manufacturing output over the month was much worse than expected.

The news means the Bank of England is likely to delay any increase in interest rates until later in the year.

To add to the economic gloom was the news that high street spending is also down. The Telegraph reported on a survey which showed that 40% of consumers – equivalent to 20m people – have made "significant" spending cutbacks in their daily lives since the turn of the year.

"The Big Money Index from AXA also showed a dramatic fall in financial confidence over the past 12 months. One in five Britons have admitted to regretting some of their pre-recession financial decisions, while 25pc of people have been forced to dip into their savings and investments, particularly among the older population."

Rising fuel, food and clothing prices and January's VAT tax increase have meant that the average household has £13 a week less to spend than it did one year ago.

The implications, of yet another set of depressing data, for savers and spenders is best articulated by Mindful Money blogger Shuan Richards .

In his latest blog Richards claims the UK economy is heading for a period of stagflation. 

He writes: "If anything the UK showed signs of slowing down before the US.

If we look back we see that the fall in economic output in the last quarter of last year of 0.5% was followed only by a rise of 0.5% in the first quarter of this year meaning we had already stagnated."

"Unfortunately we have also managed to combine this with a too high level of inflation meaning that we are exhibiting signs of stagflation."

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