WASHINGTON – The world economy is deteriorating more quickly than leading economists predicted only weeks ago, with Britain on Friday becoming the latest nation to surprise analysts with the depth of its economic pain.
Britain posted its worst quarterly contraction since 1980 on the heels of sharper than expected slowdowns reported from Germany to China to South Korea.
The grim data, analysts said, underscores how the burst of the biggest credit bubble in history is seeping into the real economies around the world, silencing construction cranes, bankrupting businesses and throwing millions of people out of work.
“In just the past few days, we’ve had a big downward revision, we’re seeing that an even bigger deceleration is on the way than we thought,” said Simon Johnson, former chief economist at the International Monetary Fund.
The depth of the troubles, analysts say, indicates that nations may need to spend more than the billions of dollars already planned on stimulus packages to jump-start their economies, and that a global recovery could take longer, perhaps pushing into 2010.
Analysts are particularly concerned about the slowdown in China and the recession in Europe. There is mounting concern about the stability of the euro and the British pound, which dropped to a 24-year low against the dollar Friday. Analysts are fretting about the possibility of a debt default in a euro-zone country that could send fresh shock waves through financial markets.
The problems in Europe now appear to be as bad if not worse than those in the United States. In the last quarter of 2008, the British economy shrank at an annualized rate of 6 percent. That is worse than economists expected, but also showed the British recession may be even harsher than the one in the United States, where analysts predict data expected next week will show the U.S. economy to have contracted between 5 and 5.5 percent in the last quarter of 2008.
The meltdown is altering high streets in Britain. Marks & Spencer, sometimes described as the bellwether of Britain’s retail sector, said this month that it would close 27 stores and cut more than 1,000 jobs.
The average price of a house has plummeted to mid-2004 levels, according to Halifax, Britain’s biggest mortgage lender. The number of people out of work has climbed to nearly 2 million, a level not seen since 1997 when the Labor Party came to power.