Bank of England expected to slash growth forecast
The Bank of England is expected to cut growth forecasts close to zero from the 0.8% predicted in May as the double-dip recession intensifies.
The quarterly inflation report is likely to indicate no growth for 2012 compared with 2% predicted a year ago. Governor Sir Mervyn King is expected to be asked about a possible interest rate cut from the current record 0.5%. The UK recession deepened between April and June, with output falling by 0.7%, official data released at the end of July showed. The data from Office of National Statistics indicated the contraction is bigger-than-expected, which followed a 0.3% drop in the first three months of the year, was largely due to a sharp slowdown in the construction sector.
German industrial orders in June, posted a fall of 1.7%, nearly twice the level of contraction forecast. The major factor in the decline was the collapse of orders for capital goods from the eurozone. This release confirms the German economy is going through a phase of weaker growth.
The intensified eurozone debt crisis continues to hit Italy as its economy contracted for a fourth straight quarter. GDP for the three month to June declined 0.7%, marginally less than the 0.8% forecast. The Italian government is implementing €20bn worth of cuts as part of their austerity measures which have curtailed consumer spending and business investment.
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