Economy may be shrinking

GROWTH is weak and the UK’s economy may be contracting in this quarter, the monetary policy committee’s Martin Weale said yesterday.

“The underlying rate of growth is weak, I wouldn’t be terribly surprised if we saw growth contract in the fourth quarter,” Weale told Channel 4 News. “The risk of recession is higher than it was a few months ago.”

Weale, who voted for higher interest rates as recently as July, blamed his rapidly changing assessment of the economy’s fortunes on the Eurozone crisis: “I think the problems of the euro area and the knock on consequences for our banks, for business confidence, for the way consumers feel about things are likely to prove important,” he said.

Weale offered little hope for the near future: “I find it difficult to forecast how the Eurozone crisis will be resolved. Even a clear resolution would not solve all the underlying problems.”