Wednesday September 9, 01:14 PM
Economy set for recovery, but job fears loom
By Alice Ritchie
LONDON (AFP) - Hopes that the country is heading out of recession were fuelled by a raft of positive new economic data Wednesday, although doubts remain over how quickly the country will return to growth.
Analysts have been encouraged by new industry data, signs of life in the job and property markets and a rebounding stock market -- and one respected think tank said the recession actually ended in May.
However, most analysts expect unemployment to continue rising and say even when growth resumes, it will be some time before the country returns to the kind of economic activity seen before the global financial crisis began last year.
Wednesday saw the release of positive figures on trade, jobs and consumer confidence, and international ratings agency Moody's announced the country was likely to maintain its top AAA (Xetra: 722800 - news) credit rating for the time being.
Combined with a recent stock market rally and figures Tuesday showing an increase in manufacturing output, they reinforce the expectation that the recession will end in the third quarter of this year.
"The trade data showed underlying improvement in July, thereby providing support to mounting hopes and expectations that the economy will return to growth in the third quarter," said analyst Howard Archer of IHS Global Insight.
Estate agents this week reported a surge in interest from potential buyers, and a new report from Nationwide banking group revealed that while consumers remain cautious, confidence is on the up.
"The rise in positive sentiment... 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," said Nationwide chief economist Martin Gahbauer.
France, Germany and Japan have officially exited recession but Britain and the United States have yet to return to growth after the biggest global downturn since the 1930s.
Official data that would prove the country was out of recession is not due until the end of October.
Yet the National Institute of Economic and Social Research (NIESR) said Tuesday that it estimates national output rose by 0.2 percent in the three months ending in August -- suggestion the recession is already over.
"This is the first time our GDP indicator has been higher over a three-month average since May of 2008 and reinforces our view that the recession ended in May of this year," the think tank said.
However, it warned of a "period of stagnation" to come, adding: "The end of the recession should not be confused with a return to normal economic conditions."
Unemployment remains a major concern, despite a report from the Recruitment and Employment Confederation on Wednesday showing the first growth in permanent appointments in 17 months.
The number of people unemployed hit a 14-year-high in the three months to June, reaching 2.43 million, and analysts expect it to continue climbing when the next batch of figures are published next week.
Finance ministers from the G20 meeting in London last weekend cited concerns about jobs as one reason why they remain cautious about economic recovery.
And this was echoed by David Blanchflower, a former member of the Bank of England's interest rate-setting monetary policy committee.
"I am worried that in the UK and the rest of Europe people don't appreciate that unemployment is still rising, and that this, alongside rising negative equity, will be extremely damaging for confidence and for the broader economy," he told the Daily Telegraph newspaper Wednesday.
"Despite these figures, banks are still not lending; these are not green shoots -- they are just noise."
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