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Consumer Spending Likely To Slow

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Consumer spending is likely to slow significantly because of tighter credit conditions, according to Tim Besley, an external member of the Bank of England's monetary policy committee.

Small increases in the price of credit can significantly deter households from borrowing and spending, Professor Besley argued after a speech in London. With credit conditions becoming much tighter, he agreed with the Bank's assessment that consumption growth would be "very weak" in 2008.

He estimated that a rise in the gap between mortgage rates and official interest rates of just 0.2 percentage points in any year appeared to reduce the growth rate of consumption by around 1.1 per cent.

Read the whole story at Financial Times Via Yahoo