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4
Economy
The Economy
strikes back
In recent months it has been claimed that the global
economic crisis is coming to an end. But is this truly the
case? Clare Creek investigates
I
t’s all very well and good to encourage a Disposable income is further subdued by The CBI agrees, predicting that the UK
certain amount of positivity following the rising energy prices and, despite the likelihood economy is expected to emerge from recession
period of economic negativity and of unemployment levels stabilising, it is still through modest growth in the third and fourth
depression we have seen. Nonetheless, to unlikely that a meaningful jobs recovery will be quarters of this year, but constraints on demand
say that we are experiencing complete imminent. Without income growth it is hard to will ensure that growth in 2010 remains fragile.
turnaround and an end to economic envisage consumer spending improving. The The CBI said that near-term economic prospects
problems is just around the corner is slightly CBI believes that household spending will stay are brightening. It predicts that UK GDP will
exaggerated. Or is it? under significant pressure as consumers remain post quarter-on-quarter growth of 0.3% in 2009
In the second half of 2009 we have certainly worried about job losses, see weak wage growth, Q3, edging up to 0.4% in Q4, and forecasts that
seen an improvement, with global equity and opt to increase savings and cut debts. GDP will shrink by 4.3% in 2009 and grow by
markets on the rise and corporate bond spread Household consumption is forecast to fall by 0.9% in 2010.
narrowing. Additionally, many countries have 3.2% in 2009 and again by 0.2% in 2010, Commenting, Richard Lambert, CBI
recorded a positive growth in the second quarter although on a quarterly basis it should grow Director-General, says: "The outlook is
of this year and many other economies believe slowly in the second half of that year. improving as the UK draws strength from
they will be improved by the third quarter. This Having said all of this, it is all doom and quantitative easing, a weak pound and a
of course is positive news and worth gloom. One particularly positive note is that the recovering global economy. Although
mentioning, but does it constitute an end to the housing market is no longer a drag on the growth this quarter should mark the end
turmoil? economy. Evidence clearly demonstrates distinct of the recession, conditions in the UK will
improvements in terms of increased sales along remain tough for some time yet, and it is
Consumer spending with prices stabilising. And when people buy difficult to see where demand growth will
The period of above average growth that we new homes, they tend to buy new furniture etc come from.
have seen throughout the world in the second to go in them, thus boosting the economy "Firms that have run down their stocks will
half of 2009 has mainly been fuelled by an further. now be starting to raise output to meet
increase in production levels, to the point where demand, and consumers are likely to bring
they match demand. However, it is unlikely that The end? forward spending before VAT rises. But once
this can continue due to demand for goods and So will the end of 2009 bring the end of the these two boosts are out of the way there is no
services stabilising rather than continuing to recession? A relapse in economic growth is clear driver of robust economic growth into
grow at the same levels. At the most we are likely highly possible as we enter 2010, but this does 2010.
to see a few months of above average growth, not necessarily mean that we re-enter recession. "Growth next year will remain very weak,
followed by a slower, steadier increase. Instead in 2010 it is expected that we will see the while job losses will continue and household
This, in itself, would be fine but it is all linked global economy return to its long term average. consumption will stay tightly squeezed.”
to what happens with unemployment. Given The Bank of England’s Monetary Policy So it can be said that the global economy is
that consumer spending is key to our economic Committee minutes, released at the end of improving with a number of countries already
recovery, a complete turnaround does not seem September, revealed that the Committee's out of recession. However, it does remain
imminent as people are concentrating on saving outlook for the UK economy is less negative premature to suggest the end of 2009 will bring
rather than spending. Plus unemployment is than has recently been perceived. The minutes about a complete end to all our current
expected to continue rising, but at a suggest that "growth in the second half of the problems. Nevertheless, we are definitely
progressively slower pace. The CBI still sees year is likely to be positive," and mentions the showing early signs of healing which, given the
unemployment peaking at around three million "start of a virtuous upward spiral for the past turbulence, is in itself something to be
in 2010 Q2. economy". celebrated.
October 2009 Mortgage Introducer www.mortgageintroducer.com
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