UK fourth quarter GDP - a 1.5 percent decline?

A 1.5 percent decline - that is what the National Institute of Economic and Social Research predicts for the fourth quarter of 2008.

Thus, it would appear that last year's frantic rate cuts didn't save the UK economy from recession. In fact, those cuts, rather than restoring consumer confidence, scared the crap out of everyone. Those cuts told us that Government and Bank of England were in a state of outright panic. Unsurprisingly, consumers got the message, delayed discretionary spending, which pushed the economy downwards.

The UK is now nicely set up for an economic catastrophe. Output is shrinking fast; the government deficit is exploding; the banking system is dead, and sterling is in free fall.

Jan. 10 (Bloomberg) -- The U.K. economy shrank at the fastest pace in almost three decades during the fourth quarter as the recession deepened, the National Institute for Economic and Social Research said.

Gross domestic product fell 1.5 percent in the three months through December, compared with a drop of 0.6 percent in the third quarter, the London-based institute, whose clients include the Treasury and the central bank, estimated in a report today. That would be the worst quarterly contraction since 1980, when Britain was in the grips of a steel workers’ strike.

“The rate of recession increased sharply in the autumn of last year,” Niesr said in a statement. “Since 1955, when quarterly figures were first produced, there have been only five quarters in which output has fallen more.”