A beginning of a new economic week dear reader as the United Kingdom today is fundamental free while the Confederation of British Industry (CBI) the biggest business lobby in the nation believes that Prime Minister Gordon Brown should not create fiscal stimulus anymore.
The business lobby also stated that the any more tax cuts might back fire and cause Britons to save rather than spend on anticipations that the government will boost tax levels later since this might be a reason that will be behind the widened debt, due to the fall in tax receipts.
The CBI also said that the British Government should wait for the latest stimulus package and monetary easing to start kicking in before coming up with new measures to recover the economy and that a new stimulus will just widen the current deficit that economy is in.
As the government is gathering less cash from taxes and boosting spending on welfare to try to the fight the prolonged recession lowers earnings as companies try to coup with the current economic conditions while pushes up unemployment rates since many industries demobilize employees as a way to reduce expenses. The unemployment rate has climbed at its fastest pace since 1971 to currently stand at 6.5 percent.
Although the beginning of this week is smooth yes this is a major week in the nation as they will be releasing retail sales in which expectations show will plummet further from the tightened credit conditions and pared consumers spending from the softening job market.
Also later this week we will be receiving data concerning inflation rates in which expectations will reveal that the monthly rates rose yet the yearly are still spiraling downwards led from the crippled domestic demand and falling oil prices. Last but not least the GDP reading will be coming out with the readings showing that gross domestic product was unrevised from the preliminary reading coming in showing that the nation contracted by 1.5% still the worst quarter contraction since the 1980s.
The UK now does not just face a normal recession yet an extended recession with deflation risks in the medium term that were triggered from declining energy prices and dampened Britons demand. As the recession continues to ravage the outlook of Britain leads consumers to lack confidence for a recovery to take place anytime soon.
From the forgotten confidence in the nation causes curtailed consumption since Britons most likely save their money instead of spend as they wait for more upcoming harsh times, this pushes industries to lower their output as a way to balance the supply levels with falling demand, this weighs on the labor market which further undermines growth prospects.
With fewer sales comes lower production meaning fewer employees therefore all resulting in a not functioning economic cycle which as we see ladies and gentleman is what exactly we are seeing in the UK with deteriorating economic activity, one area holding back growth in a different sector.
Turning to the UK stock market we see that as of 10:47 the FTSE 100 Index is rallying led from the optimism spread through the market regarding the U.S. government's plan to widen the support that financial institutions are going to be receiving as a way to provide tranquility in the financial system, the index leaped 69.46 points or 1.81% to 3,912.31 points.
Let us enjoy the ride this week yet let's not look forward to the upcoming data to be released because as market expectations show will only give us enough evidence that conditions have not yet improved…