The National Institute of Economic and Social Research, a leading economic think-tank, has given the beleaguered PM a boost by suggesting that UK GDP bottomed out in March and started to rise again in April and May, for the first time in a year. If it’s right, that would mean a return to growth even earlier than Alistair Darling predicted – a forecast, you may recall, that was greeted with derision at the time by most economists. This tallies with some of the other positive numbers that have started to emerge from the manufacturing sector and the property market this week. But is this really a recovery, or just a brief rally before another slump?
The NIESR suggested a couple of months ago that output had stopped falling, and according to its latest figures, the ‘trough of the depression’ came in March. The economy then grew 0.2% in April, apparently, and another 0.1% in May. With news this week that manufacturing and industrial output is also starting to creep up again, and the Council of Mortgage Lenders adding to the green shoots bonanza this morning by reporting that the number of new mortgages jumped by 16% in April (albeit to historically low levels), we’re seeing more and more indications that at the very least, the worst of the recession may be behind us.
In his Budget, Alistair Darling ventured that the economy would return to growth in the last quarter of 2009. But if the NIESR is right (and they have been in the past), there’s a good chance that the official GDP figures could show a flattening out in the second quarter, and a return to growth in the third quarter. As he tries to rally the troops for an election that he seemingly has little chance of winning, this will be manna from heaven for Gordon Brown, since he can then claim that he was right all along, and an economic genius to boot.
However, the question is whether even this modest recovery will be sustainable. In some respects, given the enormous amounts of stimulus money national governments have been throwing at the problem, it would be remarkable if we weren’t seeing some effect. But as private equity boss (and sometime MT contributor) Jon Moulton pointed out on the Today programme this morning, we’ve tried to resolve the problem of massive over-borrowing by a load of extra borrowing. At some point, this is going to come home to roost – individually and collectively, we’ll have to start paying it back. As we do, it’s likely to depress growth, probably leading to higher unemployment and lower spending. So we’re not out of the woods yet.
But hey, it looks increasingly like the recession may be over. That has to be good news, doesn’t it?
In today's bulletin:
The recession is over, says think-tank
Football crazy as United agree world record Ronaldo transfer
Sun shines on Homebase sales figures
Editor's blog: Fat cats who gorged too long?
Monster ray of hope for managers