Is The Recession Over For The U.K.?

Is this more than just a shoot? Possibly a branch with a flower bud attached?

Business Week says that a respected British think tank has proclaimed the recession over in the U.K.

The recession is over, according to one of the nation’s most respected economic think-tanks.

The UK’s surprising resilience is confirmed by the National Institute of Economic and Social Research (NIESR), an independent body with an enviable record for accuracy. It says that the economy hit rock bottom in as early as March and returned to growth, albeit modestly, in April and May.

The institute says that the economy grew by about 0.2 per cent in April and by 0.1 per cent last month. Although hardly a return to the boom conditions that prevailed before the credit crunch, these figures mark the end of more than a year of stagnation and recession, and stand in stark contrast to the grimmest predictions of a 1930s-style slump. Ray Barrell, director of forecasting at the institute, said that “the evidence from the last few months is that we may well have reached the bottom of the depression”.

Now you may want to read all of this article because after it gets past the “world is returning to normal” puffery, it does allow that there may be a few bumps along the road and the reason for any recent growth might not have all that much staying power.

You see, it all comes down to why there might have been a turn in output. If it’s just an inventory restocking phenomenon and not supported by final demand from consumers then odds are that it collapses back in on itself. Unfortunately, the answer to that question is yet to be determined.

One interesting point of the article is that if the recession truly has ended it will have been bad but not as bad as the downturn in the 1980’s. If that’s the case it raises a legitimate question. Was the response to this recession overdone? It’s an idea that keeps running around my head not just as it might pertain to the U.K. but to the U.S. as well. I’ll have some further thoughts on this.

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