Recession could be 'deeper than previously thought'

Posted: 16 Feb 2009 08:22:58 GMT

Economist Simon Ward, of New Star Asset Management, has suggested that the Bank of England's predictions that the recession will bottom out in the autumn could be correct but that the downturn could be far deeper than once thought.

The Bank of England has predicted that the recession will lead to a further 0.8 per cent in negative growth before the economy bottoms out but this figure could be greater.

"Based on monthly data on services and industrial output, GDP in December was an estimated 3.1 per cent below its second-quarter peak, implying that this recession is already deeper than those in 1974-75 and 1990-91," Mr Ward wrote.

"The Bank's forecast suggests a further reduction of only 0.8 per cent before a trough is reached, which may prove to be an underestimate given current negative momentum."

The prospect of a deeper recession also means that there could be a growth in the number of redundancies and repossessions this year, meaning many homeowners will choose to downsize their homes.

Those choosing to do so may wish to sell their homes online, which could speed up a sale as buyers could avoid expensive estate agent's fees.



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