Here’s a conundrum: When is an end of recession not an end of recession? Answer: when the economic trends brighten up but the real indicators of economic prosperity -– rising employment, rising wages, access to credit –- are still out of the reach of the general population.
That’s pretty much what the Confederation of British Industry economic forecast concluded earlier this week. The CBI predicted UK GDP will shrink in 2009 by 4.3 per cent, but the recession will end this year, with 2010 GDP growing by 0.9 per cent.
The de-stocking of inventory will tail off and producers will see an uplift in demand as a result of stock rooms needing to be replenished by the end of the year.
At the same time, consumers will rush to beat VAT increases in the New Year, filling retailers’ coffers in the run-up to Christmas.
Once these two factors normalise, GDP growth will fall away making the first two quarters of 2010 a bit gloomy for economists. Speaking of normalisation, bank lending rates will also increase to around 2 per cent by the end of next year.
Unemployment will continue to rise to a level of around three million by the end of next year. Consumer spending will not significantly improve, as people continue to feel uncertain about their employment prospects and reduce their levels of debt.
The CBI’s results show how fractured economic indicators can become from real life, when the top-line metrics improve, but living standards stay flat.
The next 18 months isn’t going to a bed of roses. As employers and employees, we are going to have to accept another year of frugality before any prospect of economic improvement. Employers will have to keep operating strategies of efficiency drives and employee engagement for perhaps a little longer than anticipated, before they can gear up for growth again. Employees can look forward to the flexible attitude towards working conditions.
This recession will end, as all previous recessions have done before, but not any time soon, in any meaningful way.
(Pic: Lamrock-images cc2.0)
