ITEM club comments
Peter Spencer, chief economic adviser to the ITEM Club, said: "Although one or two positive signs have started to appear, we face another 12-18 months of serious grief. Around nine hundred thousand jobs will be lost this year and half a million next. Consumption will fall by nearly 4% over this period as people worry increasingly about job security.
"This recession is unusual in terms of the degree of monetary and financial stimulus that has been applied. The whole kitchen sink has been thrown at the problem - whereas normally monetary policy would have to be tightened to bring down inflation. That is why I believe the hopeful signs seen in recent weeks mark a turning point rather than the false dawn that appeared so cruelly in 1931.
"So far at least the signs are positive that the MPC's aggressive policies are working. The latest credit conditions survey by the Bank of England showed a net improvement in corporate credit availability and ITEM believes that a combination of low interest rates, QE and agreements on lending between the government and the banks will lead to more positive signs for both corporates and consumers.
"The credit crunch may finally be easing and with it will come the beginning of the end of the recession," concludes Spencer.
The ITEM club announcement stressed that even if this is the start of a recovery, 2009 is still going to be pretty rubbish. It reckons world trade will contract by nine percent this year. However, with the UK less reliant on exporting manufactured goods to China than many other leading economies, it is better off in that respect.
