UK consumers buying less

Bloomberg

Chancellor of the Exchequer Alistair Darling pledged 20 billion pounds ($30 billion) of tax cuts and spending this week as the loan freeze and rising unemployment threaten to exacerbate the recession. Bank of England Governor Mervyn King said Tuesday that restoring the flow of credit to the economy was the "single most pressing challenge" facing policy makers.

"Consumer spending is extremely weak," said George Buckley, an economist at Deutsche Bank in London. "Things could be worse than we think. The bank needs to cut 50 basis points in December, but they could easily move by 100."

The Bank of England cut its benchmark interest rate by 1.5 percent to 3 percent this month, the lowest level since 1955. The Organization for Economic Cooperation and Development said Tuesday that the world's largest economies need further interest-rate reductions and tax cuts.

Industrial production fell by 1.1 percent in the quarter and manufacturing dropped by 1.3 percent, the statistics office said. The drop in both categories was revised from a previous estimate of 1 percent. Construction fell 0.7 percent, compared with a prior estimate of 0.8 percent.