The British Chambers of Commerce, in the second quarter survey released this week, suggests the pace of decline in the UK economy is clearly easing and the worst phase of the recession is over. This is a brave call.
The organisation admitted “serious downward pressures” persist across all sectors and all key balances are in negative territory and remain weak by historical standards.
Economic policy is reliant on the three S’s of Sterling, Stock and Stimulus. The BCC is anxious the latter should be sustained by extending the QE programme over the next few months. Sterling will be of little benefit to growth, if world trade down by 20% in the first four months of the year, remains weak. The stock effect will mean the radical fall in first quarter GDP of 4.9% will not be repeated as stock changes accounted for 1.5% of the shortfall but of itself this will not provide stimulus.
In the manufacturing sector, capital goods (-17.3%), basic metals (-22.6%) , engineering (-18.8%) were worst hit. Consumer durables (-12.3%) were again badly hit. Non durables and food, drink and tobacco were relatively unscathed down by around 2%.
The pattern of output falls across the sectors, is typical of severe recession. The depth of the manufacturing slow down is not quite as bad as that of the 1980’s but only just. The danger is emerging the length of the slow down could be much more protracted unless the US economy and world trade recover and soon.
ONS Index of Production May 2009
British Chambers of Commerce Survey Q2 2009
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