The headline says it all. The U.K. has fallen into its economic downturn with much greater speed than the U.S. Retail sales were down in June3.9% after a rise of 3.6% in May.
U.K. retail sales dropped in June by the most since at least 1986 as accelerating inflation and the slowdown in economic growth prompted consumers to cut spending.
Sales fell 3.9 percent after rising 3.6 percent in May, which was the biggest increase since the data series began more than two decades ago, the Office for National Statistics said today in London. Economists forecast a 2.6 percent drop, the median of 30 estimates in a Bloomberg News survey showed.
–Bloomberg, 24 Jul 2008
The U.K. is looking at falling consumer demand, falling home prices and home sales, but is constrained by rising inflation. There has not been a single economic report that offers a glimmer of hope for the British economy in the last month or two.
In the meantime, the Bank of England is even threatening to raise interest rates to fight spiraling inflation. One can only hope that the recent fall in commodity prices offer some respite to an economy in freefall.
The retail sales report for June offers a very bleak outlook for the U.K., much worse than what we have so far seen in the U.S. Against this background, it is understandable that the British banking sector has had trouble raising capital.