A Reflection in the Pond

The United States is not the only economy that is having challenges. China's growth has "slowed" to just over 10%. The U.K. has had issues with bank failures, public confidence, high energy prices and other common problems.

From MarketWatch: Bank of England dove urges quick rate cuts

"I think we are going into recession and we are probably in one right now," Blanchflower told the Guardian newspaper. "It's not too late to stop it but we have to act right now. Monetary policy has been far too tight for too long."

Blanchflower was the only member of the nine-person MPC to vote for rate cuts in May and June. Details of the MPC's July policy meeting will be released Wednesday.

Also Monday, the Ernst & Young Item Club, a closely-watched forecasting group, said the British economy will struggle to avoid recession in 2009, likely growing by just 1%.

Surging inflation pressures leave the Bank of England unable to move interest rates despite the coming slowdown, spelling trouble for household consumption and making for further falls in the housing market, said Peter Spencer, the group's chief economist.

"We have already seen a housing crisis that has morphed from a credit crunch to a general collapse in confidence as prices have tumbled," Spencer said. "Our worry is that without the usual medication from the Bank of England -- which would have nasty inflationary side effects in this environment -- the consumer will follow suit, moving from their current state of denial into a state of despair."

...

Already-overstretched households will likely see real disposable income growth of 1% in 2008 and 1.5% in 2009, the forecast said. Tougher credit repayments will limit consumer spending growth to just 0.2% in 2009. Rising inflation, tighter lending standards and sharp reversals in housing and equity markets will keep consumers under pressure, the forecast said.

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