Long, Slow Recovery
The economic downturn, which began in late 2007, looks to be drawing out into 2009 and beyond.
Indicators are showing a laboured but growing economy, more akin to a cooling economy rather than a total freezing.
It is views shared by many analysts who are now expect higher energy prices and inflation to limit growth.
The Council of Mortgage Lenders (CML) has added to the pessimistic view by forecasting a continued decline in housing prices in 2008 as buyer delay purchases.
According to the CML it expects a decline in housing prices in 2008 of around seven per cent.
“In the wake of the credit crunch, 2008 will be remembered as a very weak year in the housing market,” CML director general Michael Coogan said.
But our forecasts assume some indirect benefits from the Bank of England special liquidity scheme beginning to have an effect in the mortgage market in the later part of the year,” he said.
It seems that times are changing and more people are expecting a long and slow recovery.
The CML’s last forecast predicted a return to growth towards the end of 2008.
The credit crisis was the catalyst for the current woes but it is the ongoing threat of high inflation that will keep a lid firmly on any recovery.
The inflation risk is enormous and no central bank can afford to sit back and wait for the economy to turn around with low interest rates.
Interest will rise and rise sharply.
No amount of liquidity will boost lending when customers are faceing rising interest rates and inflated petrol prices.
