Blog: Chris MercerWe're doomed. We're saved. Actually, we might be doomed.

Chris Mercer | 25 January 2011

The topsy-turvy UK economy is lurching once more towards double-dip recession, this time with a dash of stagflation, and consumer confidence has plummeted.

The UK's economy shrank by 0.5% in the final quarter of 2010, surprising many of the so-called experts, who were expecting slight growth. Poor weather in December has been blamed for hampering retail sales. But, even without this, the economy would have been flat against the same period of 2009, said the Office of National Statistics (ONS), which released the figures today (25 January).

Drinks companies, alongside the entire consumer products sector, may have to grimace a little harder than we were expecting in 2011.

The spectre of a double-dip recession continues to loom, while a new threat has emerged in the form of prolonged stagflation - a period of relatively high unemployment and inflation coupled with economic stagnation. Consumer price inflation in the UK is running at close to 4%.

Consumer confidence in the UK, meanwhile, is at its lowest ebb for almost two years, according to the latest Household Finance Survey from Markit Economics. "January’s survey indicates that household finances deteriorated further from the already downbeat picture taken at the end of last year," said Tim Moore, a senior economist at Markit, yesterday.

"Little respite appears around the corner, as survey respondents reported the most pessimistic outlook for their finances since early 2009," Moore said. Markit surveys 1,500 UK adults every month.

UK chancellor George Osborne said today that the ONS data is "clearly disappointing", but he said that the Government's austerity drive will "not be blown off course". The ONS figures are preliminary and subject to review.


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