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Recovery could arrive much sooner than expected

By Sean O'Grady, Economics Editor

One of the most eagerly awaited and bullish indicators of recovery in the British economy was published yesterday. The latest survey of business confidence in the services sector showed that output may already have started to rise in that part of the economy – which comprises 70 per cent of the total.

The Chartered Institute of Purchasing and Supply's poll is an index where a reading above 50 implies expansion and one below that contraction. Having remained stubbornly below the 50 mark since March 2008, it rose to 51.7 in May, ahead of market expectations.

Importantly, it follows better readings for the construction and manufacturing sectors, and a composite reading for the three – 50.4 – suggests that the economy may still contract in the second quarter, but only very marginally, with a return to positive growth likely by the end o f the year. A spokeswoman for Markit, which conducts the survey, said that "the UK is the first of the European economies to see a return to economic growth".

Parallel data released in Europe also showed an improvement. Yet doubts surround the strength and sustainability of recovery. Vicky Redwood, UK Economist at Capital Economics, commented: "Even if the surveys show a similar increase in June as they did in May, a weighted average of the three would be consistent with a small fall in GDP in the second quarter of around 0.2 per cent." Official data show that the economy shrank by 1.9 per cent in the first quarter.

Manufacturers are seeing no improvement in access to finance, the Engineering Employers' Federation added.

Observers also say the latest data is unlikely to alter Bank of England policy radically. The Bank's Monetary Policy Committee will announce its latest decision at midday today. Howard Archer, of Global Insight, said: "The Bank is unlikely to be hugely swayed by the survey indicating modest growth and it seems likely to keep interest rates down at 0.50 per cent deep into 2010.

"The Bank may very well also further extend its quantitative easing programme, but probably not today."

Incomes Data Services (IDS) added that pay rises had subsided from 3 per cent to 2 per cent, with pay freezes increasingly common in manufacturing.

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party over
[info]someofusknow wrote:
Thursday, 4 June 2009 at 03:19 am (UTC)
Recovery could arrive much sooner than expected or may not arrive ever.

It must be difficult being a journalist locked in the dysfunctional mainstream thinking.

Western economies have come to the end of thr road with respect to economic growth. The system has proven to be a failure and now that the oil supply is declining it's party over. No amount of 'kick starting', optimistic surveys or wishful thinking will alter that reality.
Re: party over
[info]pieinthesky2 wrote:
Thursday, 4 June 2009 at 11:04 am (UTC)
and why are you so authorative on the matter?
Re: party over
[info]someofusknow wrote:
Thursday, 4 June 2009 at 10:50 pm (UTC)
Because I have been studying the matter for over a decade, am a memeber of ASPO, the Association for the Study of Peak Oil, I have written three books on the topic, was a speaker at a symposium, and follow energy and resource related trends on a daily basis.
Re: party over
[info]pieinthesky2 wrote:
Thursday, 4 June 2009 at 11:11 pm (UTC)
Well if you know what's wrong go and get elected to parliament and sort it out if your'e so clever!!
Re: party over
[info]someofusknow wrote:
Friday, 5 June 2009 at 06:05 am (UTC)
Have tried, but have now given up. Most people vote for candidates who tell them what they want to hear, not the truth. People want to hear that the good times will go on forever, that peak oil is a myth, that climate change is a myth, that deforestation can easily be reveresed, that there are plenty of fish in the sea, and a multitude of other delusions that are completely detached from reality.

Be prepared for a major financial-economic dislocation before October 09
Recovery could arrive sooner.....
[info]victormc wrote:
Thursday, 4 June 2009 at 06:41 am (UTC)
What a load of unmitigated nonsense. Not on my planet where unemployment is at 2.2m set to rise to over 3m+ (all false figures anyway it's much higher). Businesses closing like flies. Treasury revenues falling like a stone. Payments to benefit claimants of all sorts will be paid with inflated money (quantative easing??) thus interest rates are on the rise, look at your food prices due to the collapsed pound. Remember we don't export anything our nett imports are enormous. 40m quid a day to the EU thieves. The banks are still as yet unreformed. Soaring bankruptcies and repossessions. A general election is overdue. (how many words have I got left?) Sean, please tell me where your planet is, from a pensioner and saver. What a joke that is........
Recovery could much sooner......
[info]victormc wrote:
Thursday, 4 June 2009 at 07:56 am (UTC)
In my litany at 06.41. In my anger at reading such rubbish I forgot to mention the essential that oil/petrol pump prices are rising fast despite a world glut of oil. This fact alone depresses all markets....
Feast and Famine.
[info]alan_honiton wrote:
Thursday, 4 June 2009 at 08:36 am (UTC)
Just because one of many economic indicators turns positive for one month, recovery is just around the corner? Bumping along the bottom normally does involve the odd leap up, especially with the indicator you have chosen to highlight, which just amounts to reacting temporarily to excessive de-stocking, (see the Honda example). I have thought for some time that this recession is going to be an elongated L shaped one. I am saddend to note that Paul Krugman now agrees that a low level of economic activity is likely to last for 5-10 years. We've already eaten the 7 fat cows, now all we've got is 7 skinny ones.