Wednesday, 9 September 2009

The recession is over




The recession ended in May.

The National Institute of Social and Economic Research has discovered this amazing piece of good fortune amongst all the data that they study.

Growth of 0.2% between June and August = 3 months of positive growth, so that's the end of that chapter. Never mind that the drop in 2008 was 0.8% , which would have required another 0.6% just to level at 2007 figs, the recession is offically over.

Of course in reality the figures do not indicate anything like an end to the recession but merely confirm that we stopped crash diving some while back and are now bumping along the bottom. How long for is the great unknown. Manufacturing was up 0.9% which was well ahead of expectations. Other commentators here recently have pointed out the low inventories and the inevitability of restocking leading to an increase in orders for the Aug/Sept/Oct period. Can this turn around in stock levels can be maintained? The bad news is the boost was largely driven by car production which was 10.4% up.

This is due to the amazing success of the scrappage schemes and clunker cash deals throughout Europe. These schemes are all due to run out within a few months and the increase in Vat in the UK will only depress the manufacturing figures. Retail on the other hand had poor figures. 0.1% down. Doesn't sound like much but those are soft figures the retailers are facing. Last year's summer weather wash out was repeated again. Clothing and footwear are especially weather dependant.

"It's clear the deceptively good sales growth of those months {july/aug} was due to summer sun and price cuts - not any major revival in how customers are feeling."

Its clear the recession is far from over, and the 'fragile recovery' is going to need all the nurturing it can get.
Scrapping VAT on new cars and trucks would increase production in the car factories and would at least keep the momentum going. Many fleets have opted to hold vehicles for five years instead of the more usual three. A VAT cut might persuade them to change their minds. The rest of the EU would probably gladly look at a temporary exemption for all new vehicles. Or certain 'Green' vehicles if they must have a reason other than it makes sense. Its just a more expensive, far easier to administer, version of the scrappage scheme after all.

10 comments:

Mark Wadsworth said...

"It's clear the recession is far from over, and the 'fragile recovery' is going to need all the nurturing it can get."

Agreed.

"Scrapping VAT on new cars and trucks would increase production in the car factories and would at least keep the momentum going."

Agreed. In fact, let's leave the EU and scrap VAT, full stop.

James Higham said...

Of course in reality the figures do not indicate anything like an end to the recession but merely confirm that we stopped crash diving some while back and are now bumping along the bottom. How long for is the great unknown.

Agreed it's not over and predictions for crashes will indeed come to pass just short of Christmas, the corner might have been technically turned but that still doesn't give employment unless the crippling tax regime [esp. stealth taxes] is made saner and firms get the idea that it might be worth venturing and offering work.

Then comes the NVQ problem where even a toilet cleaner needs a CPH [certificate of personal hygiene, available after an expensive 12 week course at your local Connexions] and so on and so on.

It's this faith, especially from investors of the kind who read this worthy blog, which perpetuates the same control and manipulation by the CBs, under the guise of response to the situation and next time, down we go again.

One can be capitalist without having to indulge in macro-crashes and recoveries. Crashes and recoveries of individual companies is sufficient to provide a profit.

In the meantime, let's leave the EU and scrap VAT, as Mark said.

Blue Eyes said...

Why is it always the sodding car industry that gets my hard-earned cash? I don't have a car, I don't want a car, I don't want to pay for anyone else to get a car with my money. Screw the car industry. Screw any particular industry. We won't have a recovery until we have paid some of our debts back.

ratbag said...

Encouraging overgeared consumers to spend more is madness.
Time for everyone to have a refresher course in Austrian Economics.

Mark Wadsworth said...

@ Blue Eyes, being far to cars generally, the tax they pay (VAT, import duties, fuel duties, road tax, insurance premium tax, PAYE on benefits in kind, yadda yadda) is far in excess of what the government spends on road maintenance and car-related stuff.

Blue Eyes said...

@Mark Wadsworth, so what? I already pay considerably more in tax than I get back in services. If anyone should be give a "break" it should be single, childless above-average earners not HardWorkingFamiliesWhoFancyANicerCar.

I agree with Ratbag.

Demetrius said...

A passing thought, what is all this doing to the second hand market? Isn't that a major part of the whole car market? How many car dealers have or could go under?

Charles said...

Demetrius

In the US it has killed it. And combine that with the requirement that clunkers are destroyed, it has really hurt those charities like Goodwill who depend on the sale of second hand clunkers for a significant proprortion of their income

Law on unintended consequences coming into play

Edindie said...

"Scrapping VAT on new cars and trucks would increase production in the car factories and would at least keep the momentum going."

I thought you could claim VAT back on trucks and vans etc already?

Anonymous said...

Private cars cannot get the VAT back. The VAT inclusion is added at every level of the chain. Taking it off would reduce the price of new cars.