The Bank of England’s expansion of stimulus may not be enough to prevent the U.K. economy slipping back into recession, the British Chambers of Commerce said.
“Given the worsening international situation and the acute problems facing the euro zone, there is a clear need for the Monetary Policy Committee and the government to make every effort to avert risks of recession,” BCC Chief Economist David Kern said in an e-mailed statement in London Monday. “The recent increase” in so-called quantitative easing “is welcomed, but more radical measures are needed.”
The Bank of England raised the ceiling for bond purchases to 275 billion pounds ($431 billion) from 200 billion pounds on Oct. 6, the biggest expansion since the first round of stimulus in March 2009. Governor Mervyn King said the move was a response to what may be the worst financial crisis ever.
Data last week showed the U.K. economy grew just 0.1 percent in the second quarter, less than previously estimated. A survey by the BCC published Monday showed measures of domestic and export sales at manufacturers and services companies declined in the third quarter.
An index of domestic factory sales fell 15 points to 3, the lowest since the first quarter of 2010, while a gauge of domestic sales at services companies dropped 10 points to zero. Measures of export sales and orders at both industries dropped to their lowest since 2009. The employment outlook and confidence also fell, according to the survey, which covered 6,702 companies between Aug. 29 and Sept. 21. The results are “disappointing and worrying,” the BCC said.
There are “signs of stagnation in the domestic economy,” Kern said. “The forward-looking home order balances moved into negative territory, for both manufacturing and services, pointing to risks of recession.”
He said authorities should focus further measures on purchasing securitized small- and medium-sized enterprise loans and other private sector assets. While another recession “can be avoided,” the BCC will probably lower its September forecasts for growth of 1.1 percent in 2011 and 2.1 percent in 2012, Kern said.
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