The sun may be shining, and the birds may be singing their hearts out – Cityblogger is a closet fan of Bill Oddie’s SpringWatch as, strangely enough, so is Tiddles – but all in the garden is far from rosy. For the powers that be continue to spoil our fledgling summer with their tales of doom.

In his annual speech at Mansion House last night, Bank of England Governor Mervyn King prophesied more misery to come. Tucking into the Lord Mayor’s banquet for bankers and merchants of the City of London (Cityblogger doubts very much that gruel was on the menu there..), Our Merv said UK workers’ take home pay will “stagnate” and admitted that “some families will find it particularly difficult.” But he warned that pay must remain low in the face of rising inflation and oil prices, or risk a “prolonged period of sluggish output and high unemployment.” He also said that once the credit crunch was over, mortgage lending would get back to normal but insisted that “the era of cheap mortgage finance” was over.

This latest dollop of cheer came after minutes released yesterday from the Bank of England Monetary Policy Committee’s (MPC) last meeting showed that some members had been in favour of an interest rate hike, but had ultimately decided against it.

What’s more, today HBOS has come out and predicted that house prices will fall by 9 per cent this year, as well as announcing further writedowns on its investments in housebuilding companies. While trading at the bank was described as “satisfactory”, shares in the company behind Halifax and Bank of Scotland dipped by 5 per cent in the morning’s trade. Banking shares have been hard hit altogether today, with the FTSE100 on the slide once more. However, James Hamilton, analyst at broker Numis, maintains his buy recommendation on HBOS’ shares, believing that they will outperform their peers. The shares have fallen so hard this year that perhaps the only way is up!

At least some good news is forthcoming from the Office of National Statistics, which says retail sales in May rose by 3.5 per cent, above forecasts! Although this is said to be puzzling the boffins at the MPC.

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