Recession Over? You’re Having a Laugh

recession overFollowing the Treasury’s announcement that the Gross Domestic Product (GRP) increased by 0.1% in the last quarter of 2009, how many of us really believe that this piffling improvement over a three months period proves that we are now out of recession and 2010 will herald a return to the halcyon days of full employment and bulging order books. Probably very few – at least amongst those who are not confined to a mental institution.

The figure is so minuscule as to be a nonsense, and 0.1% won’t make any practical difference to the economy. The Government has admitted that the figure is provisional and subject to amendment. Such amendment is as much as 0.2% upwards or downwards. If downwards that means we are still in recession.

If we consider the areas of economic activity which have been largely responsible for this improvement, the result becomes even less impressive. We are told that the catering and leisure industry has had a significant impact on the figure. But surely December is the busiest time of the year for pubs, hotels, restaurants, and allied establishments. This, of course, is due to the Christmas and New Year festivities. And, of course, January and February are the quietest time of the year for those trades. So let’s all try to guess what effect this will have on improving the current quarter’s statistics. Let me think now, oh yes – none.

The increase in Government and Public Spending also assisted the figure to climb into the black. But how long can this go on? After all, it is money which has been provided by the taxpaying public which is being spent. Robbing Peter to pay Paul. A General Election must take place by May at the latest, and whichever party obtains a majority it will have to impose swingeing tax increases and cuts in public spending. On the 1st January VAT returned to its usual level of 17.5%. Also, there is a widespread opinion in Westminster that it will soon be increased to 20%.

We may be technically out of recession. However, the hard reality is that we have been sliding downwards for the last eighteen months and we are now at the bottom of the trough. It’s going to be a long and difficult climb back to the happy pleasures which we took for granted and enjoyed pre-recession.

Source: Market Wire, February 2010

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