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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (45146)	1/25/2006 12:37:54 AM
From: regli	Respond to of 116555

BROWN FACES `WORST ECONOMIC PERFORMANCE FOR A DECADE' January 25, 2006 Wednesday By Hugo Duncan, PA City Staff The extent to which Chancellor Gordon Brown overestimated GDP growth last year will be laid bare today with the City forecasting the worst economic performance in more than a decade. Many analysts expect the Office for National Statistics (ONS) to say economic growth in 2005 was just 1.7% when it releases its provisional figures this morning - the lowest level since 1992 and well down on 2004's rate of 3.1%. In March last year, Mr Brown forecast growth of 3% to 3.5% for 2005, although he scaled that back to 1.75% in December's pre-budget report. Investec economist Philip Shaw said: ``The figure is likely to come out at 1.7%, which is pretty disappointing. ``It is a long way behind what the Chancellor predicted at the start of the year, but those forecasts looked pretty unrealistic even when they were published. ``It is a major downgrading on growth prospects since this time last year, although it is in line with the scaled-back figure Gordon Brown gave in his pre-budget report.'' He added that the figure could be ``critical'' for UK interest rates, with an immediate cut in February a possibility. Further clues as to the timing of the next change in the rate of borrowing will also come today when the minutes of the Bank of England's latest Monetary Policy Committee meeting are released. Mr Shaw's forecast of 1.7% growth came on the back of an expected growth rate of 0.4% in the final three months of 2005, the same figure predicted by HSBC economist John Butler. Earlier this week the Ernst & Young Item Club, which bases its predictions on the Treasury's model of the economy, also forecast 1.7% growth in 2005. It predicted GDP growth of 2.3% for 2006 - in line with Mr Brown's expectations of 2% to 2.5%. The CBI, which expects growth of 2.2% in 2006, was another to forecast that today's ONS figures would show that growth in 2005 was just 1.7%. But Jonathan Said, economist at the Centre for Economics and Business Research, forecast fourth quarter growth to be 0.5% or 0.6% with GDP for 2005 to be 1.8%. ``GDP was quite slow compared with expectations because the housing market was slow and the consumer took a year off to save,'' he said. ``But on long-term trend growth of 2.3%, growth in 2005 was not so bad and still acceptable, even though it was below the trend.'' In his pre-budget report in December, Mr Brown cited high oil and commodity prices around the world for the slowdown in the UK economy.