Bullish GDP data signals recovery
Article Date: Jun 11 2009
Time to grab the bull by the horns?
Estimates of gross domestic product (GDP) for April and May suggest that the UK may be over the worst of the recession.
Output fell by 0.9 per cent in the three months to May, according to the figures from the National Institute of Economic and Social Research (NIESR), but this was smaller than the decline of 1.5 per cent in the three months ending in April.
Additionally, output is estimated to have risen in April by 0.2 per cent and in May by 0.1 per cent.
The NIESR concedes that monthly data is erratic and ‘likely to be less accurate in the current disturbed economic circumstances’. However, it claims its quarterly data has a standard error of 0.1 to 0.2 per cent when compared to the first official estimate of GDP produced by the Office of National Statistics.
The estimated growth is largely accounted for by industry (up 0.5 per cent in the two months to May) and private services (up 0.4 per cent), while agriculture, construction and public services are broadly flat.
Comment from Rose Lewis, Partner at Pembridge Partners LLP
What about the future? Well, here is where some supposition has to come in to play. Everyone is finding it harder to get a signature on a contract, they are taking longer to close, but they do exist. Money is starting to come back in to the markets, and equity values are keeping up in the listed companies of quality. A lot of the smart money stayed on the sidelines in the past few months, and have missed out on the 30% + rises in share prices. Those fund managers are looking a bit silly now, having under performed the market on the share price recovery. They are now buying in on an opportunistic basis, but there is still a lot of money on the sidelines. Over the next few months, they are going to find it very tough to stay out as the markets recover, and they should keep the rally going. Will we see old levels? Not for quite some time. Will we see some confidence come back in to the market led by the stabilisation of house prices and equity markets? Well, I think the answer is yes. Will that lead to more business for the marketing service sector? Again, with a delay, the answer is yes.
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