Sssh, don’t mention the green shoots
Here is the good news. There is some good news. It is a rash politician who mentions green shoots until they have become sturdy plants, but there are signs of economic improvement.
There are plenty of negative indications too, but at least there are some positives. That’s better than when it was all gloom. And that is a sign that the economy is heading for a turning point: just as there was still belated data showing boom even after the downturn started, there will be early signs of recovery although we are still going into recession.
Those signs include buoyant retail sales. Maybe March sunshine brought out shoppers, perhaps the Vat cut is really working, more likely the mortgage reductions are reaching homeowners’ pockets, but consumers seem to be doing their best to lead Britain out of recession.
There are positive signs in the housing market too with more mortgage approvals and thus more sales. Some indicators suggest house prices have risen in odd months too. High-value loans are available again. But as the annual rate of price decrease falls, more buyers will re-enter the market.
Improved demand is good for corporations, which are sufficiently into the downturn to have made serious cost cuts that should show results during this year and be reflected in profits – and anticipated by share prices.
The problem, not least for politicians risking mentioning green shoots, is whether such indicators are blips or trends and whether the negatives outweigh the positives. The unemployment caused by those corporate cost cuts is still rising, for instance, and ought to curb retail spending or house buying.
And signs of economic recovery will undo the self-correcting mechanisms that would bring about recovery. Stronger demand will limit the fall, in inflation, for example; sterling has already risen in expectation of the economy improving.
We are bumping along the bottom. The isolated positive signs are the bumps but at least things cannot get worse if we are at the bottom and sooner or later those odd bits of good news will become more common.
No-one suggests the UK economy is booming, but performing badly is better than performing disastrously and is a step back towards growth. There is plenty of scope for further setbacks, not least in returning quickly to the bad old ways. But it would be churlish to ignore green shoots when they are there – just as it would be imprudent for the chancellor to mention them in his budget.
