Shares and the Economy

Yesterday January 28th saw another decline in share prices. In fact it seems that the fears of an economic recession have indeed affected many of the economies around the world including the UK and their share prices. A leading firm dealing in the accounting aspects have stated that the slump in the housing market is going to result in a credit squeeze around the world and it will begin to affect the consumers. The consumers are already seeing fear in their lives for the spending they have been doing and how it will have to change if they are going to keep above the debts they have. In other words the consumers realize that trouble is ahead and confidence in spending any money anywhere is shaky at best.

2008 is going to be considered the worst year since the early nineties for economic relationships. There are many warnings in regards to the US market affecting the UK and the rest of the world. In fact the UK is in fear that they will soon see a recession in two years if the US begins a recession. The information was derived from a survey that has now begun to warn that five million consumers in the UK have now missed at least one payment in the last six months. It also seems that another aspect of the research has shown that about 20,000 jobs have been lost in London in the last few months. This means that there will be more debt from those who are unemployed and that will in turn affect the overall market and economy.

The fact that this report has such dire news has affected that FTSE 100 index. The index has dropped by another 1.4 percent since the report was released, and that means it has now seen over a 10 percent drop since the beginning of the new year. The UK is showing that this drop in points is the worst it has been since September 2002.

The report has also affected the Bank of England. The Bank of England Committee regarding Monetary Policy has now asked for a change in interest rate. There were talks about the bank maybe lowering the interest rate, as the US did just last week, but many were not positive there would be an actual change. Now with the report it seems more likely the interest rate will be cut. Danny Blanchflower is one of the individuals on the committee that has asked for the rates to be cut. In fact he is asking for the same 75 percent rate cut that the US Federal Reserve announced last week in a surprise move. They are hoping that a similar cut in the UK will stop the move towards their own recession and to hopefully help their consumers before dire need sets in. Part of his reasons for asking for the cut is the fear the consumers are feeling. They believe that a cut will help to increase that confidence and help to release the restrictive interest rates that consumers are feeling.