The recession is probably over, leading experts declared yesterday, as evidence showed that key parts of the economy were growing again.
The National Institute for Economic and Social Research, one of the most respected independent economic forecasters, estimated that Britain had seen economic growth in the three months to August.
Its announcement coincided with figures showing that the manufacturing sector was enjoying its strongest growth for 18 months, that consumer confidence was recovering and that the jobs market was improving for the first time in almost a year and a half.
Many estate agents reported that house sales and inquiries were up by more than 50 per cent in August on the same month last year.
The head of the International Monetary Fund also predicted that the world was likely to pull out from its economic slump earlier than expected.
Economists said that the data and forecasts indicated that Britain’s economy was growing for the first time in more than a year and a half – and the recession was most likely over. A recession is officially defined as the economy shrinking for two or more successive quarters.
The figures were a major boost for Alistair Darling, the Chancellor, who earlier this year insisted that the economy would be growing again before the end of the year.
In a further tonic for Mr Darling and Gordon Brown, Ray Barrell, the chief forecaster at the institute, said that government policies, alongside the Bank of England’s decision to slash interest rates to nearly zero, were largely to thank for the recovery.
Mr Barrell also gave warning that the coming months would be far from pleasant. “This is not going to be a V-shaped recovery,” he said. “This is going to be very tough. It will take until late 2012 for the economy to return to the size it was at the peak in 2008. This will be a long, painful recession.”
“These data support other signs that the overall recession is ending,” said Michael Saunders, an economist at Citigroup. “We do not expect that recovery will be rapid, because of poor credit supply and the need for major fiscal restraint to get the public finances back on a sustainable path. Even so, as these data indicate, upside surprises in activity data continue to outweigh downside surprises.”
Last month, the Nationwide’s consumer confidence index rose to its highest level since May 2008.
Our view at House Network is “cautiously optimistic” for 2010 and beyond. We believe that there is an underlying positive current that now must be controlled in an orderly fashion that will allow the property market to recover and for the debts that the country owes to be gradually paid back whilst sustaining growth.
The demand for property is certainly a major positive to aid this recovery as is the news that mortgages are becoming easier to obtain and more important than that – unemployment is showing signs of falling which is a huge relief to everyone.