Brussels revealed that the previously mentioned three countries were likely to enter into two consecutive quarters of negative growth, which is the technical definition of recession. It should be added that recessions are a part of the economic cycles and it is sustained negative growth that raises concerns in connection with a wider economic depression.
The 15-nation euro zone has shown a growth of 1.3%, which is significantly lower than the previous projection of 1.7%. The European Central Bank kept the interest rate at 4.25% in order to ease the inflationary pressure that national governments face. Euro-zone governments had predicted a 2% inflation which was later modified to 3.2%. However, it seems that de facto inflation is going to creep up to 3.6%.
Brussels said that the UK economy had not grown in the second quarter of 2008 and it was likely to contract by an annual rate of 0.2% in the next two quarters. This would set the annual growth of the UK economy back to 1.1% in 2008, which is much less than the previous prediction of 1.7%. The housing market slump and the volatile financial markets are the primary reasons discussed in relation with the causes of slowdown.
A Treasury spokesman was confident that with the employment level at record highs, interest rates that are historically low and a decade of rising incomes behind us, “the UK is well placed to deal with these challenges”. In connection with the fear of a stubborn inflation, Joaquin Almunia, the Economic and Monetary Affairs Commissioner, blamed the stumbling housing market, the struggling financial markets and the soaring commodity prices, such as food and oil.
The forecast of the Commission echoes the predictions of the Organization for Economic Cooperation and Development, which released its even grimmer projections earlier this week.
Vocabulary
- economic outlook – gazdasági kilátás
- recession – gazdasági recesszió, visszaesés
- depression – gazdasági válság (tartós recesszió)
- manifold – sokrétű
- consumer spending – fogyasztási célú kiadás
- technical definition – szakmai meghatározása vminek
- predict sg – számít vmire
- contract – gazdaság zsugorodik
- volatile – érzékeny (gazdasági változásokra)
- stubborn – makacs
- soaring – gyorsan növekvő
- commodity – termék, áru
- grim – rémisztő
