Has Britain Really Emerged From the Recession?

Sunday, April 25th, 2010

Some news outlets have declared Britain as having emerged from the recession, coming on the heels of the data released by the Office of National Statistics which revealed the GDP of Britain grew by 0.2 percent in the first quarter.

Unfortunately, that was only half of what was expected, as estimates were growth was going to be in line with the final quarter of 2009, which stood at 0.4 percent.

First of all, the numbers are very preliminary, as they're only based on about 40 percent of the data normally used to in the final estimates of the government.

Other input has the GDP growing at about 1.25 percent for 2010, which would mean for the remainder of the year the average quarterly growth would have to be on average - 0.7 percent.

While the business confidence in the country is up, with optimism strong that the economy will rebound, it seems that may be more hopeful and wishful thinking rather than the realities of where things are really at.

For example, British consumers don't share the confidence British business does, as consumer confidence dropped in March to what it was in December. That implies consumers are going to continue to hold on to their money, and spending should be contracted.

If that's the case, other significant growth areas like investment by companies in the UK wouldn't reach levels that would result in adding to the needed growth of 0.7 percent a quarter, and it would assume on the British export side that their major trading partners would be rebounding as well to generate increasing sales. That of course would depend on individual partners, but that isn't a sure thing in the difficult economic circumstances emerging in the EU, which will cause even more consumers to hold onto their money.

This is all important because the stimulus from the government is pretty much over and businesses will have to stand on their own to grow, as support is leveling and can't be counted on going forward.

My thought is there are far too many variable to declare the recession in Britain over, and it seems it'll be a struggle to reach the growth estimates for Britain thrown out by different economic entities.

Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com

Tags: britain , british business , consumer confidence , gdp , recession

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