Financial crisis and its upshots to last for 3 years
The report by E&Y is the most gloomy assessment yet of how the impending recession will affect consumer expenditure. Gainers & Losers | Survive the crisis
By PTI |
LONDON: The convulsions in the financial sector has spread like a "pandemic" and its effects including that on housing market and high street spending will last for next three years, a report said on Monday.
Another 5,00,000 people will lose their jobs in the UK as the economy is in the infant stage of a full-blown recession, the report by Ernst & Young Item Club predicted.
The Item Club, a forecasting house, predicted that consumer expenditure -- on everything from food, clothes, holidays, household bills, home improvements and entertainment -- will fall by 1.2 per cent in 2009. It will increase by only 0.2 per cent in 2010 before growing by 1.9 per cent in 2011.
The report is the most gloomy assessment yet of how the impending recession will affect consumer expenditure, the benchmark of how well or badly people are coping with economic pressures.
Professor Peter Spencer, the report's author, told The Daily telegraph: "The way the virus is spreading is like a pandemic. It's not just spread from New York across the Atlantic. It is also spreading from the City to the real economy.
"The people who will really be squeezed are younger families with children which are finding it difficult to keep hold of their job -- and dare I say it - their homes."
Commodity prices are falling fast, with the price of a litre of unleaded petrol dipping below one pound, and the price of bread starting to come down.
A separate report yesterday, from Citigroup, provided an even gloomier picture, with Michael Saunders, its chief UK economist, warning that the jobless total could increase to 2.7 million by late 2010.
Saunders said: "The debt-driven boom reached an unsustainable peak, which relied not just on easy credit availability but the lemming-like willingness of households and businesses to see higher debt as a way to riches. That illusion, once shattered, cannot easily be recreated. The bubble has burst.
"After the searing experience of seeing house prices tumble and credit availability evaporate, households and businesses are likely to aim to save more, hold more liquidity, borrow less -- and the adjustment to this implies an inevitable severe drop in spending and asset prices."
Another 5,00,000 people will lose their jobs in the UK as the economy is in the infant stage of a full-blown recession, the report by Ernst & Young Item Club predicted.
The Item Club, a forecasting house, predicted that consumer expenditure -- on everything from food, clothes, holidays, household bills, home improvements and entertainment -- will fall by 1.2 per cent in 2009. It will increase by only 0.2 per cent in 2010 before growing by 1.9 per cent in 2011.
The report is the most gloomy assessment yet of how the impending recession will affect consumer expenditure, the benchmark of how well or badly people are coping with economic pressures.
Professor Peter Spencer, the report's author, told The Daily telegraph: "The way the virus is spreading is like a pandemic. It's not just spread from New York across the Atlantic. It is also spreading from the City to the real economy.
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"The people who will really be squeezed are younger families with children which are finding it difficult to keep hold of their job -- and dare I say it - their homes."
Commodity prices are falling fast, with the price of a litre of unleaded petrol dipping below one pound, and the price of bread starting to come down.
A separate report yesterday, from Citigroup, provided an even gloomier picture, with Michael Saunders, its chief UK economist, warning that the jobless total could increase to 2.7 million by late 2010.
Saunders said: "The debt-driven boom reached an unsustainable peak, which relied not just on easy credit availability but the lemming-like willingness of households and businesses to see higher debt as a way to riches. That illusion, once shattered, cannot easily be recreated. The bubble has burst.
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"After the searing experience of seeing house prices tumble and credit availability evaporate, households and businesses are likely to aim to save more, hold more liquidity, borrow less -- and the adjustment to this implies an inevitable severe drop in spending and asset prices."
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