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Could it really be true that the recession is over, in the sense that GDP has stopped falling? We'll get a better idea next week
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On Tuesday, the National Institute of Economic and Social Research will publish its estimate for GDP in June. It could show that output has risen slightly since the first quarter (Q1).
This might be corroborated by official numbers. Tuesday's figures could show that industrial production in April and May was around the same level as in Q1. With earlier figures showing that retail sales are up from Q1's levels so far this quarter, and with the government sector expanding, this would imply that large chunks of the economy at least are flat or rising.
Whether or not the UK recession is over, it's pretty clear that we are doing better than the eurozone. Whereas Tuesday's numbers are likely to show that industrial production in the UK is less than 12 per cent down from last May's level, Friday's figures are expected to show annual falls of around 18 per cent in France and 24 per cent in Italy, and Tuesday's figures are likely to show a 34 per cent fall in German factory orders. This difference between the UK and the eurozone is in part due to the greater defensiveness of UK production: food manufacturing and pharmaceuticals are less likely to suffer in recession than capital goods industries.
We'll see on Thursday what the Bank of England's monetary policy committee makes of this. Economists expect it to leave both Bank rate and the amount of quantitative easing unchanged. A big reason for this is that even if the economy is stabilising, inflation will continue to edge down.
Indeed, Friday's figures on manufacturing prices are expected to show exactly this. Economists expect the strength of the pound to outweigh the pick-up in oil prices, with the result that annual input price inflation becomes more negative while the 'narrow' measure of output price inflation (which excludes food, tobacco, alcohol and petrol) falls further.
Note, though, that the fact that input prices are falling faster than output prices does not mean that profit margins are increasing. A bigger cost than raw materials is labour. And because productivity has fallen, unit wage costs have increased, which has squeezed margins.
Two other things to note will be Monday's figures on new car registrations from the Society of Motor Manufacturers and Traders, which should show an annual fall of around 25 per cent, and Friday's US trade deficit, which should be around $30bn. Although less than half its peak, this is still consistent with the US's net foreign debt rising, which is a mild concern.
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-IC-2.1.3g-prod - 17/03/2010 18:13:09 - ben.wheeler
