Is the UK coming out of recession?

Wednesday, 09 September 2009 09:40

A spur of positive economic data today point to the UK now starting to climb out of the recession.

Estimates from thinktank the National Institute of Economic and Social Research (NIESR) show UK GDP rose 0.2 per cent in the three months to the end of August.

NIESR now thinks the recession ended in May. Previously it had put April as the end point of the recession - but the thinktank economists have now backtracked.

Nationwide today also released its consumer confidence data for August - with rises in all areas recorded.

However, confidence remains muted - although the tide may be turning.

Martin Gahbauer, Nationwide chief economist, said: "The moderate increase in confidence this month indicates that, for the first time since April, consumers are beginning to feel more positive, not only about the future, but also about the present situation.

"The rise in positive sentiment across all the indices is no surprise as a number of key economic indicators continue to show that we may have reached the bottom of the current recessionary cycle."

Employment data from Recruitment and Employment Confederation (REC) show slight growth in appointments.

Kevin Green, REC chief executive, said: "For the first time in 17 months, the UK jobs market is improving.

"It seems that employers are becoming more confident in their hiring decisions with an increase in permanent recruitment and growth in temporary placements for the first time in over a year."

However, caution remains strong in the jobs market - especially as public spending cuts may create more job losses.

Bernard Brown, head of business services at KPMG, said: "It is too early to speculate whether [REC employment data] signals the end of the recession.

"One important factor to watch over the coming months will be how the public sector is coping with the financial and economic crisis. Given that employment costs are a substantial element of public sector spending, you would expect significant pressure on those costs going forward.

"This is likely to have a significant impact on the UK jobs market."

Furthermore, the journey out of recession is unlikely to match the speed of decline.

NIESR warns: "There may well be a period of stagnation now, with output rising in some months and falling in others.

"The end of the recession should not be confused with a return to normal economic conditions."

Mr Gahbauer at Nationwide concurred.

"It is likely that there will be a protracted recovery and we may see some volatility in the data as factors such as the rise in fuel duty affect sentiment," he said.

"Although positive news about the housing market may have helped boost confidence, consumers' views about spending remain relatively cautious, possibly because the level of heavy discounting seen earlier in the year has now subsided."

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