The UK Recession Is Over!

The recession ended in May.

The National Institute of Social and Economic Research has discovered this amazing piece of good fortune amongst all the data that they study.

Growth of 0.2% between June and August = 3 months of positive growth, so that’s the end of that chapter. Never mind that the drop in 2008 was 0.8% , which would have required another 0.6% just to level at 2007 figs, the recession is offically over.

Of course in reality the figures do not indicate anything like an end to the recession but merely confirm that we stopped crash diving some while back and are now bumping along the bottom. How long for is the great unknown. Manufacturing was up 0.9% which was well ahead of expectations. Other commentators here recently have pointed out the low inventories and the inevitability of restocking leading to an increase in orders for the Aug/Sept/Oct period. Can this turn around in stock levels can be maintained? The bad news is the boost was largely driven by car production which was 10.4% up.

This is due to the amazing success of the scrappage schemes and clunker cash deals throughout Europe. These schemes are all due to run out within a few months and the increase in Vat in the UK will only depress the manufacturing figures. Retail on the other hand had poor figures. 0.1% down. Doesn’t sound like much but those are soft figures the retailers are facing. Last year’s summer weather wash out was repeated again. Clothing and footwear are especially weather dependant.

“It’s clear the deceptively good sales growth of those months {july/aug} was due to summer sun and price cuts - not any major revival in how customers are feeling.”

Its clear the recession is far from over, and the ‘fragile recovery’ is going to need all the nurturing it can get.
Scrapping VAT on new cars and trucks would increase production in the car factories and would at least keep the momentum going. Many fleets have opted to hold vehicles for five years instead of the more usual three. A VAT cut might persuade them to change their minds. The rest of the EU would probably gladly look at a temporary exemption for all new vehicles. Or certain ‘Green’ vehicles if they must have a reason other than it makes sense. Its just a more expensive, far easier to administer, version of the scrappage scheme after all.

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