U.K. Outlook: Recession Might Be Over

by: TradingHelpDesk

Doomsayers, serial pessimists towards UK equities and the British economy are sitting a little lower in their seats today. But three short months ago, at the dawn of spring, when the equity rally was so new, so fragile, equity trading bears stretched their necks, held their heads above their trading room screens and gently mocked opposing colleagues who dared to hope for a sustainable rally.

If few of those March optimists were brave enough to openly predict a sharp market-wide rally, fewer still also forecasted a return to positive economic growth in Q2. Even 6 weeks ago, the grim reaper of wealth, depression, was still cited as possible by those who refused to hope. It took the arrival of summer before the optimists finally outnumbered their brow-beaten foe yet irregular readers of this column may have missed earlier reports of economic green shoots such was the monopolisation in newspapers and on TV of the recent political chaos.

However, for the time being at least, the battalion of political Benny Hills have returned to their constituencies to triple-check their mortgage expense claims leaving investors and commentators to return to the useful practice of economic analysis. Most timely therefore, is this week’s headline recovery story which is undoubtedly the best yet.

The well respected National Institute of Economic and Social Research (NIESR) has released an estimate suggesting the UK economy expanded in April by a modest 0.2% and strengthened further into May. If proved accurate, and the NIESR usually is, April will prove to be the first month for a year that has enjoyed positive economic growth. This is good news indeed and worth clarifying. I will therefore put it in terms that even a Chancellor of the Exchequer, one who requires assistance to complete his own tax-return, can understand. The recession might be over. It might be over, not definitely. I can just see the top of that bear’s head. No. He’s gone.