Green shoots? Rooted

Remarkably, the highly respected National Institute for Economic and Social Research have just released a report saying the recession may have ended. Martin Weale has just told me that ‘So far as we can say, the recession is over, but there might be another downward dip’.

This is not a forecast. This is a consequence of Niesr’s unique monthly figures for GDP growth (the official figures are quarterly). Today’s assessment shows that growth returned in April (0.2 per cent) and continued in May (0.1 per cent) . Barring a calamity, second quarter GDP figures may actually show growth, and therefore mark an end to the recession.

The driver for growth has been the stock cycle, or the Honda effect, which I explained when I went to visit the Honda factory in Swindon last month. so that’s the good news. The bad news is that its impossible to say whether this growth wil be sustained. Even if we are at the turn in the stock cycle, business investment may not turn, so there could be a rapid relapse.

Even if recovery is sustained it could be a rather anaemic and sluggish recovery. Nonetheless, few could have predicted as serious an outfit as Niesr calling a technical end to recession in June. Puts the cat among the pigeons politically too.

This is what Alan Clarke, UK economist with Paribas, had to say –

“This report from NIESR provides more confirmation that recession is over.

“To be clear, we are not heading for a boom. The economy is still likely to grow much slower than potential, in turn meaning that unemployment will continue to rise. The point is the economy is no longer shrinking.”