THE view that the economic downturn may have bottomed out appears to have gathered support.
I suggested in this column last week that we may have reached a turning point, and now it appears Jean-Claude Trichet, President of the European Central Bank, has added his weight to this argument.
The credit crunch has fuelled a sharp downturn in the global economy. Banks have not been lending to businesses or consumers, a factor that has acted like a catalyst to the recession. Destocking by manufacturers, which should be a short-lived phenomenon, has added to the sense that the brakes have been slammed on.
The key economic indicators, reported every month, are offering mixed messages about the strength of the economy. This week’s retail sales figures are only the latest in a string of retail numbers that have been better than expected. Financial figures from the major banks last week have added to the impression that they may be stabilising.
If the economy has indeed bottomed out, the question then becomes how long before economic data stops bumping along the bottom and starts to positively improve?
Hopefully, for all our sakes, that won’t take too long. Just as the banks’ reluctance to lend has been a catalyst to decline, a return to reasonable lending policies should prove to be a catalyst to a speedy return to growth.
But yesterday’s unemployment data is a reminder that it is going to take many months before the fear of unemployment becomes a thing of the past. On the other hand, April’s rise in the number of people out of work is lower than March’s, again suggesting the bottom may be in sight. The emerging economic trends are a challenge to economists. The ups and downs and the pace of change, together with the novel characteristics of the credit crunch, make this recession different from anything that has gone before.
Some of the stories in today’s LDP Business reflect this mixed picture. While Norfolkline’s owners won’t say why it has been put up for sale, it is reasonable to suspect that it is because trading conditions and profits remain tight.
Redrow, which saw house sales slump last year, is now feeling optimistic enough to resume building work at some of its sites.
Monsieur Trichet’s assessment may prove correct, but a lot of uncertainty still lies ahead, which is a good thing, because previously we were facing the apparent certainty that things would remain gloomy for a long time to come.
FEARS that Fiat would close Vauxhall plants in the UK were being expressed again by union officials yesterday.
These fears, while understandable, are premature.
True, whoever owns Vauxhall, including the Ellesmere Port factory, will have to take a decision around 2016 about where to build the replacement Astra. That, however, does not make it inevitable that Fiat would close plants in Britain. They will build their next generation of new cars at whichever plant is most efficient.
The factors Fiat will take into account include the performance of the local workforce, the availability of grants and proximity of component suppliers and markets. Weighing all of these factors, you would think, on current form anyway, that Ellesmere Port would compare well.
