Thread: UK savings rate sinks to 49-year low as growth falters

UK savings rate sinks to 49-year low as growth falters

By David Prosser, Deputy Business Editor
Saturday, 28 June 2008

Britons are saving less money each month than at any time since 1959, the Office for National Statistics said yesterday, as it warned that economic growth was faltering.

The ONS said UK households saved just 1.1 per cent of their income during the first quarter of the year, the lowest figure since the end of 1959. The statistics suggest the fall-off in savings has been very rapid, with the ratio falling from 3 per cent in the final quarter of last year and 6.3 per cent in the summer of 2006.

Economists warned the collapse in savings reflected an increasingly tight squeeze on household incomes. "Households' real disposable incomes fell by 1 per cent quarter on quarter," said Howard Archer, chief economist at Global Insight. "This reinforces the belief that consumer spending is set to be reined in for an extended period, particularly as rising inflation is increasingly squeezing purchasing power."

Nervousness about the fragility of the economy was underlined by the ONS's downwards revision of growth in the first quarter. The economy grew by 0.3 per cent, the ONS said, rather than 0.4 per cent as it had estimated. The figure, the lowest for three years, suggests Alistair Darling, the Chancellor, is unlikely to meet his target of 1.75-2.25 per cent for the whole of 2008, with growth having halved since the final three months of last year.

George Buckley, chief economist of Deutsche Bank, said: "Service sector income is the weakest in a decade, profits are falling and real household disposable income is falling. It's not a positive result at all."

The ONS data was published at the same time as several other indicators emphasised the problems facing the economy.

John Lewis, Britain's second largest department store chain operator, said its sales fell by 1.2 per cent last week compared to the same week last year, the sixth time in seven weeks it has reported a decline. In addition, the Land Registry said house prices had fallen for the ninth month running in March, the most recent period for which it has data, while the number of transactions had halved since a year earlier.

There is also little sign of any easing of the inflationary pressures that have prevented the Bank of England's Monetary Policy Committee cutting interest rates to help hard-pressed households. The price of oil moved above $142 a barrel yesterday, a new record high, as Libya warned it might cut production. Analysts predicted further increases over the next few weeks.

The only piece of positive data came from the Industrial Relations Service, which said average pay settlements had only marginally edged up during the three months to the end of May, to 3.3 per cent from 3.2 a month earlier.

http://www.independent.co.uk/news/busin ... 56176.html

And it's all coming your way America.... I am ready; are you?

Can't save when it increasingly costs more for the basics.

I'm just trying to give advance warning crazybird. Many Americans are having the same problems

I'm just trying to give advance warning crazybird. Many Americans are having the same problems

I know they are. There's only so far people can cut back as well. I know they've been having like a special segment in the newspaper on how people are handling the gas crunch on their budgets. No cable, no computer, no AC, no eating out, no meat, no treats, no movies, no vacations, selling their 2nd car, riding bikes, shopping at discount grocers, cutting their insurance coverages on their homes and cars, no trips to the beauty salon, not taking medicine like they should or seeing if they have an alternative that's cheaper. Canceling magazine subscriptions and newspapers. In one breath they preach health and a "global world" and the next move to survive is total isolation except to work and sleep if you can. Granted we are spoiled to a degree, but it's our society that has made it so and we adjusted to it. There's a recall and they direct you to the internet to find out the details. I just don't know what the new rules are because from my experience you're damned if you do and damned if you don't. It's just as difficult for us to adjust to a 3rd world existance as it is for a 3rd world to adjust to this one. Everything you've ever known is suddenly wrong. Everything you've been taught doesn't apply anymore. It's stressful and more so when you don't know for sure what to do.