Sky News business editor Michael Wilson

Sorry to bring you another episode of Gloomwatch – but this time it’s the turn of the lofty brains at the Organisation for Economic Cooperation and Development to add their forecasts to the long list of things you’d rather not hear.

They predict the fall in house prices (in the OECD’s estimation, 10% by the end of next year) will slow growth in the UK to a rate well below the Treasury’s forecast. The OECD disagrees with the Bank of England view on the effect of house prices on the economy . The Paris-based organisation thinks that a fall in house values has a direct effect on consumption – and predicts growth falling sharply to 1.8% this year, and to 1.4% in 2009.

I know these look like the normal rather boring percentage calculations which have no relevance to ordinary mortals, but when you think that our Treasury predicted 2 to 2.75% growth for next year you can see how pessimistic the OECD is in its forecast that the UK is more vulnerable than most to the ravages of the credit crisis.

And it puts the blame for the weakness in the economy firmly at the doors of numbers 10 and 11 Downing Street, noting the “excessively loose fiscal policy” in play when the going was good, and no saving for a rainy day.

I think we knew that already, but the OECD also believes that the UK needs three interest cuts, next year, once inflation is seen to be falling. That is the real, worrying unknown.

That’s in line with most expert thinking, our Money Panel expects no change in the interest rate tomorrow . I think we’ll need to be very patient in our wait for cheaper money.

Comments

[Robert, Scotland 4 Jun 2008 15:56:28]

The OCED should not be allowed to frighten us unnecessarily with these wild assertions. Did not our Prime Minister and then his Chancellor of the Exchequer and every other member of this New Labour Government not tell us that our economy was better placed than most to weather this economic storm.
I mean our Government would not be insisting we pay extra "green" taxes like the upcoming Vehicle Excise Duty if they could not see a rosy future for us. Would they?

[Khalid 4 Jun 2008 14:48:31]

Sir
Alas a glimmer of good news for the UK and lets hope the council of taxes reduces such levies in accordanc with national drops in house prices.
You see all this gloom is only put forward by what I perceive to be borrowers who have committed themselves far beyond their means, and as such hate such price decreases, but I bet you my bottom dollar, if you ask [Bally Sagoo & The Cheshire Cat] they would prefer to have more money in their pockets and be able to purchase as they deem fit. As for the interest rates, I suppose we can say

[Michael Cornwall 4 Jun 2008 14:30:00]

Well I would like to give you a few morsels of information from the dust of the streets.
I had a good chat with Debs from the check out at Tescos last night.I asked her if people were changing their spending habits due to the economic climate. As she was just finishing she had more time to talk. She said people were definitly buying buy 1 get 1 free. and she pointed out the empty shelves where they had all been sold. Interestingly she added that these were not neccesary foods but things like biscuits so tesco were being good shop keepers and tempting us. She also told me people were buying in house products rather than brand names. Pineapples were £1 but she said it is not a daily buy . What she wanted was more 2 for 1 on daily buys. Interesting too my May sales were better than last year May was the same as last year.
This I believe is because I am selling lower priced not quite as good quality. and everybody is dealing with me. Alady this morning waited for me personally to come into the shop, As soon as I came in I shouted out 'No fluttering the eye lashes.' She went for it and afer half an hour beat me down by £50. I tell you Michael life on the street is not for the faint hearted.