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Recession has hit the bottom, but no upturn until spring 2010

GDP will contract by 3.9 per cent this year but the end is in sight, says CBI

By David Prosser, Deputy Business Editor

The CBI will today join the growing list of economists and business groups arguing that the UK recession is now bottoming out.

But despite the relative optimism, Britain's biggest employers' organisation says it has seen little evidence of green shoots of recovery in recent weeks, and warns that official statistics on the performance of the UK economy during the first three months of the year are expected to reveal that the downturn has been even more severe than expected.

The CBI has also substantially downgraded its forecasts for 2009 and is now predicting that the economy will shrink by 3.9 per cent this year. It had previously expected the figure to come in at 3.3 per cent. The group is also forecasting a much longer-lasting recession than other analysts, including the Government.

Nevertheless, the Chancellor, putting the final touches to the Budget he is set to announce on Wednesday, will welcome a more upbeat tone from the CBI, which is now expecting the first quarter of this year to be the most difficult of the downturn, with figures improving during the rest of the year.

"In these turbulent times it is difficult to build a clear picture of how the economy will perform, but there are a few tentative signs that the steepest phase of the recession is now behind us, and that the banking packages, aggressive monetary policy and fiscal support will steady the pace of decline from here on," said Richard Lambert, the director general of the CBI. "The recession is by no means over, but we see a return to very weak growth by spring 2010."

However, Mr Lambert said that while policy initiatives are beginning to have an improving effect on the economy, the CBI does not believe the public finances are in a sufficiently healthy state for Alistair Darling to unveil further fiscal boosts this week. "Given falling tax revenues, the shrinking economy, and alarming levels of government debt, we urge the Chancellor to avoid any further major fiscal boosts in the Budget," Mr Lambert said.

"Budget measures should be targeted on jobs and investment, with a focus on efficiency savings and public service reform."

With that background, the CBI's forecast is now for the economy to shrink by a total of 5.1 per cent during the course of the recession, which would mean the UK suffering only marginally less than in the downturn of the early 1980s, when GDP contracted by 5.9 per cent.

The group expects negative GDP figures in each quarter this year, which would mean six consecutive quarterly falls in the size of the economy, with growth not returning until the second quarter of 2010. Even then, the CBI expects the recovery to be very weak, and is now forecasting 0.1 per cent growth in the economy across 2010.

While the Chancellor is expected to revise downwards his own economic forecasts on Wednesday, the CBI's vision of the next 12 months is likely to prove much gloomier than the figures Mr Darling will lay out. The business group's projections for the public finances are also more downbeat.

The mixed analysis from the CBI is echoed by the Ernst & Young ITEM Club Spring forecast also being published today. The group is predicting GDP contraction of 3.5 per cent this year, and another 0.1 per cent in 2010. But it, too, warns of pain to come.

Peter Spencer, the chief economic adviser to the group, said: "Although one or two positive signs have started to appear, we face another 12 to 18 months of serious grief. Around 900,000 jobs will be lost this year and half a million next."

Job security fears will push consumer spending down by 3.1 per cent this year and 0.7 per cent next. With house prices now around 3 per cent lower than the fundamentals justify – compared with a 15 per cent bubble early last year – the group is predicting a 16.4 per cent fall over 2009 as a whole, and another 5 per cent drop in prices in 2010.

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No recovery in 2010
[info]lewis_northants wrote:
Monday, 20 April 2009 at 04:38 am (UTC)
Two thirds of the economy is on the high street. Half a percent interest rate equates to no interest on savings,higher costs of basic food stuffs due to the devalued pound,restrictions on credit card credit, people saving in fear of losing their jobs, US & Euro Zone holidays costs up by 1/3,energy costs are down from their peaks but still higher than last year, further large falls in home values. All of the above equate to no money being available to spend on the high street this year or the next. Massive increases in unemployment and home foreclosures will require huge increases in social security spending, These conditions equate to a perfect storm for both public and private finances. There will be no recovery this year or in 2010. Mr Brown will leave a financial legacy to Mr Cameroun, worse than that left to Obama by Bush. What will the 2010 budget bring?



the economy will start recovering 2012.
[info]famulla wrote:
Monday, 20 April 2009 at 06:45 am (UTC)
Recession has hit the bottom, but no upturn until spring 2010 and we have this in the same paper.
When will the housing market hit bottom?
Whose spring? When oil was 95 all started writing that oil would touch 300. I stopped and thought. What would the OPEC do with this moony? So. I commented OIL has to stop at 120. No more, no less. Bingo this seemed to work. No. They did not hear me. It just clicked.
Now the economy will stop at 2012. Write to me then.
I thank you
Firozali A. Mulla
A smaller recession than the early 80s, some chance
[info]bryanmcgrath wrote:
Monday, 20 April 2009 at 06:46 am (UTC)
The recession will be 5.1% top to bottom, thus leading to the "UK suffering only marginally less than in the downturn of the early 1980s, when GDP contracted by 5.9 per cent".

I afraid you have to remember the early eighties recession was, at least in part, down to the Thatcher cretins such as Howe and Walters in the UK and similar clowns in the USA such as Paul Volcker (it's never too late to teacher an old dog new tricks).

The EU was a much smaller place, without Spain, Portugal or even Greece. The former Soviet satellite counties were a decade away from membership, so their financial problems were below the radar in the early eighties.

A truly global recession, started by a financial crisis without parallel in 90 years, ONLY produces a recession as bad as the "Man Made" recession of the 80s.

Then the economists woke up
YET MORE TWADDLE
[info]soaring_eagle1 wrote:
Monday, 20 April 2009 at 07:44 am (UTC)
Why don't these fear breeders just admit they have no idea what is going on with the economy, they never did and they never will have.

Actually I am quite glad this recession hit, it will teach people to be a bit more circumspect about how they live and spend money.

It is a shame though that something drastic has to happen for people to get a good dose of common sense.

I hope it last long enough to get everyone living within thier means and not getting loans and mortgages all over the place and most of all saving money for thier futures
Re: YET MORE TWADDLE
[info]someofusknow wrote:
Monday, 20 April 2009 at 08:08 pm (UTC)
It is indeed twaddle.

The fact is, we have almost come to the end of the line for present economic system. The warnings were repeatedly given from the 1950s onwards (M.King Hubbert, Limits to Growth, but were ignored. Now we are at peak oil, peak coal, peak water etc. with nowhere to go but down,

It is a message the vast majority of people refuse to accept, so we will have to wait a while and experience peak mayhem, after which some sanity might start to prevail.

The only question is: Will humans succeed in melting the planet and causing the extinction of most life on Earth before it is all over?
Move over Darling
[info]wildbillhiccup wrote:
Monday, 20 April 2009 at 08:26 am (UTC)
So that blows Darling claim that the ression will end this year out of the water.
Now we have to decide if he's a liar or merely incompetent.
If he wants to lie to himself and Gordon thats fine but the truth is his figures just don't add up.
Poor forecasts got us here in the first place.
[info]unlikelylad wrote:
Monday, 20 April 2009 at 10:09 am (UTC)
I wish we would stop these mind game of forecasting what will happen in 3 years time and then give the results credence through the press. These "forecasters" are the same ones that failed to predict that we were looking down the barrel of a gun and that the light at the end was not a pot of gold but the spark of gunpowder. Rather than mortally wounding these idiots we seem to be even more reliant upon their abilities.

These people cannot forecast an event next week let alone 2 years out. The makings of this recession needs to be understood and the response thought through before we sit here and talk about recovery.
Buy fish from me, terror free and spiced to last.?
[info]famulla wrote:
Monday, 20 April 2009 at 11:45 am (UTC)
I am amazed at the new we have, so diverse that we are led to believe by all, ?I am right?. It is just like you going to the fish market and the vendor telling you, ?please buy my fish. It has come from Greece just now, see the Greek eyes smiling, or buy my fish, it is from Russia, frozen and salted. Fresh. Just landed. On the other hand, the Paki says, ?Buy fish from me, terror free and spiced to last.?
So who do believe?
The CBI not the Central Bank of Ireland, it is The Confederation of British Industry (CBI) is the premier lobbying organisation for UK business. We work with the government, international legislators and ... said today that the worst of the UK recession was over but warned that there would be no recovery until this time next year. The CBI expects the number of jobless people to peak at 3.25 million in 2010. ITEM?s chief economic adviser, said: ?Although one or two positive signs have started to appear, we face another12 to 18 months of serious grief.?
Yet the average UK consumer is expected to continue to cut back on spending, with household consumption forecast to drop by 3.4 per cent this year and 0.4 per cent in 2010 as low inflation and job worries keep average earnings growth weak throughout 2009.
I thank you
Firozali A. Mulla
CBI spin, sucking up to Badger Darling for a few table scraps.
[info]blastarrbxiii wrote:
Monday, 20 April 2009 at 04:50 pm (UTC)
Talk about sucking up to liebour.
All in time for Wednesdays budget.
The CBI hoping all their business chums will get thrown a few scraps off Allister Darling if they
come out with the TRIPE they just have.

Spring time for Gordon.. in Britain!! 2010 that is!!

As if the CBI can predict the future events of 12 Months hence when the Chancellor can't even do it for 6 months, barely even 3 months, hardly even that!.
He thinks there was going to be a recovery in mid 2009, now he's revised that to the end of 2009.
Then it will be mid 2010, though after that date, they will be gone, ousted and good riddance to them!

These idiots haven't a clue, that's why we are in the trouble we are now.

Take it from me, things are going to get worse before they get even worser.
The United States of America will continue to lose 3/4rs of a Million jobs every Month.
And 175,000 home repossessions ever month as well, this will wreck their economy
and effect us enormously.

Pencil in sometime in the 2020's before we even get back to the state we are in now.
If we ever do at all.



Suckers recovery
[info]living_fossil wrote:
Monday, 20 April 2009 at 07:01 pm (UTC)
This ain't no flesh wound on capitalism. What we have here is a dead parrot. Nailing it to the perch won't change it from being deceased. Forget 2012 and forget normal times ever returning because once they've had one suckers recovery there won't be another.