Britain set for recovery, but job fears loom

Hopes that Britain is heading out of recession were fuelled by a raft of positive new economic data yesterday, although doubts remain over how quickly the country will return to growth.

Analysts have been encouraged by new industry data, signs of life in the job and property markets and a rebounding stock market - and one respected think-tank said the recession actually ended in May.

However, most analysts expect unemployment to continue rising and say even when growth resumes, it will be some time before Britain returns to the kind of economic activity seen before the global financial crisis began last year.

Yesterday saw the release of positive figures on trade, jobs and consumer confidence, and international ratings agency Moody's announced Britain was likely to maintain its top AAA credit rating for the time being.

Combined with a recent stock market rally and figures showing an increase in manufacturing output, they reinforce the expectation that the recession will end in the third quarter of this year.

"The trade data showed underlying improvement in July, thereby providing support to mounting hopes and expectations that the economy will return to growth in the third quarter," said analyst Howard Archer of IHS Global Insight.

Estate agents this week reported a surge in interest from potential buyers, and a new report from Nationwide banking group revealed that while consumers remain cautious, confidence is on the up.

France, Germany and Japan have officially exited recession but Britain and the United States have yet to return to growth after the biggest global downturn since the 1930s.

Official data that would prove Britain was out of recession was not due until the end of October.

Yet the National Institute of Economic and Social Research (NIESR) said it estimates national output rose by 0.2 per cent in the three months ending in August - a suggestion the recession is already over.

"This is the first time our GDP indicator has been higher over a three-month average since May of 2008 and reinforces our view that the recession ended in May of this year," the think-tank said.

However, it warned of a "period of stagnation" to come, adding: "The end of the recession should not be confused with a return to normal economic conditions."