It would be unfair to say that Mervyn King sought to trample on the economy's green shoots yesterday. But the Governor of the Bank of England did suggest that some incoming inclement weather could make the expected summer rather less enjoyable than many imagine.
The latest report from the Bank suggests there could be a return to growth by this time next year as a triple whammy of firms restocking, monetary easing and fiscal stimulus feeds through. And it does seem likely that the worst of the downturn is now behind us, as the rate of decline in various measures of output slows.
But, as Mr King warned yesterday, there are plenty of good reasons for caution about what lies ahead. The financial sector, for instance, continues to pose a danger to the real economy. Despite the recent bounce in their share prices, Britain's large banks are sitting on billions of pounds of loans likely to go bad and, as a result, still look undercapitalised.
This weakness, combined with the disintegration of the shadow banking sector and the closure of securitisation markets, is impeding the flow of lending to the economy. A recovery starved of credit is likely to yield only sluggish growth.
And even if growth returns, unemployment is expected to continue rising well into next year. The surge in youth joblessness, with one in six 18- to 24-year-olds now out of work, is especially worrying. The longer young people are out of the workplace, the less likely it becomes that they will ever join it. We could be dealing with the social and economic costs of this recession long after it has technically ended.
Britain's economy is going to need a painful structural transformation in the coming years too. The radical shrinkage of the financial services sector has taken a formidable bite out of the British economy. This is one of the reasons Treasury tax receipts have dried up so alarmingly. And the City of London is unlikely to return to its bloated 2007 size – at least not for the foreseeable future. If we are to reach the standard of living to which we aspire, those earnings will have to be replaced.
The good news is that Britain has a comparative advantage in a host of sectors, ranging from pharmaceuticals and advanced electronics to design and media. There is plenty of potential for growth out there. Yet many of the firms in these sectors have suffered thanks to the credit crunch and the collapse in global demand. It will take time for them to build up capacity and for these new sources of national income to come through. Anyone hoping for a swift shift in the structure of our economy is likely to be disappointed.
Mr King also rightly pointed out yesterday that the global imbalances that did so much to contribute to the present crisis have not been addressed. The mercantilist orientation of Chinese policymakers persists.
The world's governments have, quite understandably, been preoccupied thus far with propping up global demand and rescuing stricken banks. But if they are to lay the foundations for a stable global recovery, they will need to address the vexed question of reforming the monetary system that governs international trade.
The sobering message from yesterday's Bank of England analysis is that it is not the recession we should be worrying about now, but the fragility of any recovery. It is not the green shoots that matter, so much as the economic weather.