US home sales slump adds to recovery fears

Sales of existing homes in the US plunged 27.2% in July compared with June to their lowest level in more than 10 years, figures suggest…

Fears are growing of a double-dip slump after sales of existing homes in the US plunged 27.2% in July compared with June to their lowest level in more than 10 years.

According to the National Association of Realtors, the main reason for the drop was the end of a housebuying tax credit introduced last year to boost sales.

The gloomy news has prompted a Bank of England member to predict trouble for the UK economy, with the ripple effect of a double dip US recession likely to reverberate around the world. Martin Weale, the most recent government appointee to the Bank of England monetary policy committee, said in an interview with the Times that the weakness of the recovery meant the economy could falter and anyone who ruled out the possibility of a return to negative growth was ‘foolish'.

The main New York stock market fell through the psychologically important 10,000 level and the London exchange was also down sharply, oil prices went into reverse and commodities declined as traders digested the news.

Analysts said they would look closely at a speech later this week by Federal Reserve chairman Ben Bernanke, who is expected to comment on prospects for the economy and the need for further government action to stimulate growth.

In Britain, austerity measures will be outlined by the coalition government after the comprehensive spending review in October, which will outline how ministers plan to cut between 25% and 40% from Whitehall spending over the next five years.

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