After all the talk of green shoots last week, some notable authorities have been trying to temper our optimism this morning. International Monetary Fund boss Dominique Strauss-Kahn suggested that the worst of the global recession wasn’t over yet, while the Confederation of British Industry argues in its latest report that the UK will have to wait until 2010 before starting its ‘slow and gradual’ recovery (in fact, it’s expecting the economy to contract by 3.9% this year, more than the Treasury forecasts). In other words, we’re not out of the woods yet...
The IMF boss spent the weekend at the hottest party in town, the meeting of the G8 finance ministers – which concluded that it was still far too early to start trying to claw back some of these enormous debts we’ve been racking up, despite a few economic indicators showing signs of improvement. ‘We are beginning to see some green shoots but nevertheless we have to be cautious,’ warned party-pooper Strauss-Kahn. ‘The large part of the worst is not yet behind us.’ And the smart money seems to agree with him: a report out from Barclays Wealth today suggests that high-net worth investors are continuing to shy away from the market, because they think prices have further to fall.
The CBI is slightly more optimistic, suggesting that the ‘harshest period of the recession seems to be behind us’, with UK GDP likely to flatten out in the second half of this year. However, director-general Richard Lambert thinks commentators have been getting carried away with the 'green shoots' stuff: ‘It will take some time before we can be sure these shoots have roots we can depend on for sustainable growth,’ he said today. The CBI is now forecasting growth of -0.1% and 0% in the next two quarters, followed by growth of 0.1% and 0.3% in the first two quarters of 2010.
One good bit of news for Gordon Brown was that the CBI thinks unemployment will come in lower than expected, because the labour market is ‘proving to be even more flexible than hoped’ (i.e. staff are grudgingly accepting pay cuts and shorter hours). And he’s also had a boost from Nobel laureate Paul Krugman: the economist reckons the UK is in a better state than any other European economy (albeit thanks partly to the depreciation of the pound) and thinks the Government should be given more credit for rescuing the banking sector.
Of course, there’s still the problem of our spiralling national debt - George Osborne has been on the offensive today, telling the Times that Labour has to start being honest about public spending cuts. Warding off a deeper recession has come at a heavy price, which is why the ‘recovery’ is unlikely to feel like a recovery any time soon...
In today's bulletin:
Worst of recession not over yet, says IMF
Woolies to reappear as Mullies?
Carroll under pressure from Anglo American investors
Talented Brits wanted for Middle East mentoring
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