Can It Be? Is The Recession Really Ending?
The stock market has been rallying, the sun’s out, that new Star Trek movie looks pretty good – maybe life’s not so bad after all! More good news in the FT today, the splashed all over the front page like a big hug: “Signs of downturn easing” reads the headline, with Jean-Claude Trichet, president of the European Central Bank saying that many countries were out of the worst of the recession. He said yesterday the global economy is “around the inflection point” – the bottom point before heading back upwards.
But this news wasn’t imparted via Trichet punching the air and pouring big tubs of Gatorade over his VP Lucas Papademos, but with the rather more sober verbiage: “In all cases we see a slowing down of the decrease in GDP”. This faintly-praised damnation is what passes for optimism these days, but we’ll take it.
Similar semi-upbeat messages are emanating from the retail sector – value of sales at UK stores rose by 6.3% over April, the fastest rise in three years, compared with just 0.6% a month earlier. It can’t just be those Matthew Williamson bikinis that are doing it – that’s a serious amount of spending! And manufacturing too is, if not blossoming, then not wilting as forcefully as it was – the industry posted its smallest decline in 13 months. “A slight increase in UK GDP in Q2 is possible,” said Neville Hill, an economist at Credit Suisse told the FT. That could mean that the recession is officially over come the autumn. High fives all round.
Yesterday’s other optimists include billionaire investor George Soros, who said: “The economic freefall has been stopped, the collapse of the financial system averted. National economic stimulus programmes are starting to take effect. The downward dynamic is easing.” Barclays Capital strategist Barry Knapp said at the end of last week: “We appear to be in the sweet spot of a recovery”; Deutsche Bank’s George Buckley said yesterday: “total output would be growing again by as soon as June and would be back to its average rate of growth by July… The ‘green shoots’ phraseology might need to be replaced with outright ‘recovery’.” Germany are also potentially out of the woods, with the export market they’re so reliant on finally growing again.
But there are some party poopers. The Bank of England is set to contradict Alastair Darling’s upbeat take on the recession during his budget speech when it announces its quarterly inflation report this week. Meanwhile, HSBC chief exec Michael Geoghegan said yesterday: “We’re still in a recession. It’s still got some time to go”. In regard to the recent confidence in the banking stocks, he said that he would be “very, very cautious about the extent to which that continues”, and as if by magic, the market is heading back down, and there’s a feeling that stocks are no longer such great value. I’m blaming this on you, Geohegan! We nearly had it in the bag!
Posted by Ben Beaumont-Thomas in Hot Money | May 12, 2009 1:00PM |