Green shoots – amid claim that 'recession may end in weeks'

Published on Monday 11 May 2009 22:11

THE recession may be bottoming out and "green shoots" of recovery could start to appear soon, leading economists claimed last night on the back of encouraging reports from international analysts.

The Organisation for Economic Cooperation and Development (OECD) said Britain was among a handful of countries which may be seeing a pause in its economic slowdown.

Releasing its monthly report on the state of the world's major economies, the Paris-based body pointed to "tentative" signs of a slower pace of decline in the UK, Italy, France and China, even though the world economy as a whole remained in deep recession.

The OECD's leading indicators are a basket of economic data that in the past have had a good record of showing economic turning points.

"Weak though these signals are, they are present," the OECD said.

The OECD report was followed by forecasts from economics teams at JPMorgan and Barclays Capital, both of which predicted that recovery is in sight for the global economy, while Deutsche Bank went further, claiming the recession in the UK could be over by next month.

George Buckley, chief UK economist at Deutsche Bank, said the British economy could start growing again in June.

Mr Buckley said if the rate of improvement continued, "total output would be growing again by as soon as June and would be back to its average rate of growth by July".

He added: "The 'green shoots' phraseology might need to be replaced with outright 'recovery'."

He included a note of caution. "The big risk is you could see a W-shaped recession. We could see policymakers taking back some of the easing too quickly."

The Bank of England last week promised to increase the amount of money it will pump into the economy through quantitative easing from 75 billion to 125 billion.

Also, employment minister Tony McNulty yesterday defended his claim that there was "light at the end of the tunnel" for the UK economy.

Mr McNulty said he had been portrayed as a "village idiot" after making the comments in an interview in January, as UK unemployment hurtled towards two million.

In the Commons yesterday, Mr McNulty insisted his remarks had been taken out of context and although he refused to repeat it yesterday, others – including billionaire financier George Soros – were not so reticent.

Mr Soros said: "I expect the recovery to make up for around half of the downturn we have had and then to move into stagnation. Asia will be first to find a way out of the crisis, but America is also currently doing that."

And he added: "National economic stimulus programmes are starting to take effect. The downward dynamic is easing."

Yesterday's brighter economic forecasts appeared to form a trend, following evidence over the weekend that business confidence in the UK had risen for the second month in a row in April, with one in three firms expecting better trading conditions in the coming year.

Over the last few weeks, several other business and retail surveys have shown greater consumer and business optimism – but with house prices remaining the one main indicator still heading downwards.

Another survey showed food price inflation easing for the first time this year.

The FTSE 100 Index closed down 26.6 points yesterday but analysts said that was just a "settling" after big rises last week.