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Crippling Household Debt To Stifle Even A Modest Recovery

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SPIRALLING household bills will hit consumers in the pocket to the tune of £2.6bn this year - equivalent to nearly a penny on income tax, new research shows.
Analysts at consultants Capital Economics say inflation-busting increases in gas, electricity, water and council tax bills threaten the hoped-for recovery in consumer spending. And they warn that fresh increases in oil or wholesale gas prices could see domestic utility bills rising again.
'The upshot is that with rising bills set to exert even greater pressure on household finances this year, 2006 looks set to be another sluggish year for consumer spending growth,' Redwood said.
John Butler, economist at HSBC, said: 'The combination of rising unemployment and the substantial squeeze on disposable income of households already tottering under a mountain of debt means the outlook is for weaker consumer spending growth this year.'
With consumers having no choice but to shoulder the burden of higher household bills, discretionary spending on major purchases like cars and holidays would be hit hardest, Butler said.
'Higher household bills are coming at a time when earnings growth is slowing, so consumers are facing a double whammy,' he added.

Does not look good for higher levels of spending in 2006. Rents will suffer most no doubt as affordability is hit hard.

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Tell me now a consumption driven economy works when you have ever rising costs, wage compression and competition driving the majority into lower wages.

I can;t see how it does (or will), at the moment debt growth is the only positive strand to consumption and that in itself will have an entirely negative rebound when the debt eventually has to be paid back. Maybe it doesn't, maybe mass default is the answer.


Global: Globalization's New Underclass

It wasn’t supposed to be this way. Globalization has long been portrayed as the rising tide that lifts all boats. The surprise is in the tide -- a rapid surge of IT-enabled connectivity that has pushed the global labor arbitrage quickly up the value chain. Only the elite at the upper end of the occupational hierarchy have been spared the pressures of an increasingly brutal wage compression. The rich are, indeed, getting richer but the rest of the workforce is not. This spells mounting disparities in the income distribution -- for developed and developing countries, alike.

Edited by OnlyMe

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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