Monday, January 19, 2009

Green Shoots of Recovery?

By nature I am an optimist. I like to look for the positive. If you give me a glass with 50% of water, it will definitely be half full. I often feel the media is guilty of exaggerating negative news. They jump on bad headlines and give a misleading impression rather than a more balanced picture. For as long as I can remember you will always hear some people bemoaning about the state of the economy.

Recently a government Minister, Baroness Vadera, got herself into hot water for mentioning some green shoots of recovery in the economy (referring to a bonds issue). I always cringe at the way the media will jump on one phrase trying to make political capital from a sentence taken out of context. But, even a sympathetic assessment would struggle to find any real green shoots of recovery.

No matter how hard we look, it can't be avoided that the economic situation is pretty dire and likely to get worse before it gets better. It is true that not all firms are laying workers off - some may even be taking workers on. But, overall the outlook on the job front is pretty dismal. Declining retail sales will cause more big names to go bankrupt. A sector that employs over 3.5 million people directly - will be a source of many job losses in the coming year.
  • The housing market continues to worsen - each month seems to bring a new record low of mortgage approvals. Falling house prices are dampening the economy in a powerful way - see Problem of falling house prices
  • Manufacturing output is falling. Even the huge depreciation in the Pound has done seemingly little to boost exports.
  • The Banking sector seems to stumble from one crisis to the next. The problems is that if the banking sector is in crisis and unwilling to lend, all business are suffering.
I am quite happy if people to seek out good news amongst the carnage. It is important to keep things in perspective - this is not the great depression. Hopefully this year we will see signs of recovery in some sectors. But, green shoots of recovery? - well let's just hope we will have some justification for saying it later in the year....

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