Green Shoots or Dead Cat Bounce?
Are you getting excited by all the talk of the green shoots of recovery’? By the report from purchasing managers on July 1st of the first increase in output since March 2008? By the news from Nationwide Building Society that house prices rose by 0.9% in June? By the report from the Home Builders Federation of the biggest annual rise in net reservations to buy new homes in May for three years?
So, is the recession at an end and is the recovery now under way?
The increase in manufacturing output looks more like a temporary correction to the savage reduction of inventories rather than sustained recovery, and the house price recovery may turn out to be just a dead cat bounce’. At the heart of the problem is that the economy needs to recover from a lower point than previously assumed. New data shows that output is down by 4.9% since the start of 2008 and not 4.1% as previously reported.
The OECD still takes the view that past growth in the UK had been unsustainable and driven by a credit boom. Any recovery will be sluggish, they say, with growth “expected to remain well below trend as households and firms rebuild their balance sheets.” A gloomy forecast that seems all too realistic following so grave a financial crisis.
So what assumptions are you going to make for your 2010/2011 business plans?