As economic conditions continue to deteriorate in the United Kingdom led retail sales to plummet as Britons spending is retrenched from the worst financial crisis since the Great Depression while the mounting of job losses also causes reduced spending in the economy.
The Office for National Statistics (ONS) released retail sales for the month of February came in at -1.9% worse than both the revised prior reading of 0.8% from 0.7% while the markets were projecting -0.4 percent. The same reading but for the year ending in February came in at 0.4% much lower than the revised previous reading of 3.8% from 3.6% while the markets were expecting the retail sales to fall to 2.5%.
Despite the retail stores reducing their prices as a way to lure customers, still they reported the lowest reading since 1995 as confidence remains low in the economy since Britons are very sure that the UK is facing a long and painful recession which pushes them to save rather than spend at a time of falling economic growth.
Also it is not just the lost confidence that is holding back consumption in the nation, but also the highest level of unemployment since 1971 at 6.5% is adding a major toll on retail sales because without money in consumers hands means that spending is pared, therefore this undermines growth prospects.
The considerable strain in the financial markets is also another factor that is negatively affecting retail sales since lately banks have been holding back cash from consumers since they fear illiquidity. Now as stores and companies have been struggling with sales and profits, they are pressured to lower staff as a way to reduce expenses.
From the weak growth in the nation while we saw major sectors that fuel economic growth tumble we saw the economy contract by 1.5 percent in the fourth quarter of 2008, tomorrow the gross domestic product (GDP) finalized reading is scheduled to be released with expectations show that the reading will be unrevised from the 1.5 percent shrinkage.
Bank of England (BoE) Governor Mervyn King projects that the nation will contract deeper during the first quarter of this year, which will be the worst shrinkage in nearly three decades as still there is falling home values, rising unemployment and tightened credit conditions that is making a recovery now in the UK far from sight.
Also in news today was total business investment fourth quarter final reading came in at -1.5% higher than the preliminary and predicted readings both at -3.9% respectively. The yearly reading also showed an upside revision to -4.5% from the preliminary and anticipated readings of -7.7 percent.
Although we see total business investment rise which means that finally banks are somewhat starting to ease lending yet still they are weak since companies have also been dealing with eroded earnings from the worst financial crisis since the 1930s. Also businesses have been struggling to get access of funds causes them to lower their investments in the economy, which is not good for the outlook because with falling investments and lower consumption, it would take the British economy longer to step out of recession.
The central bank already sees conditions deteriorate faster everyday began using unorthodox measures as they bought nearly 10 billion gilts from the 75 billion pounds they pledged to purchase within three months as a way to provide tranquility in the financial system and to lower borrowing costs. Chancellor of the Exchequer Alistair Darling has given them green light to purchase governmental bonds using 150 billion since they saw that monetary easing was not enough to revive economic conditions.
Once again another day ending with pessimistic data and economic outlook while the UK stocks are fluctuating led from falling retail stores stocks and a rise in mining companies stocks as a result of an incline in metal prices. As of 11:19 GMT we see the FTSE 100 Index gain 5.00 points or 0.13% to 3,905.25 points.