Darling forecasts end of year recovery

Half of City economists support last quarter prediction

Chancellor Alistair Darling boldly predicted Britain’s recovery will begin in October, saying the economic slump will stabalise in the last quarter of the year. Many will be hoping his forecast is correct, not least the Government itself with a general election just being over the horizon.

Mr Darling clearly has ideas much distinct from the The National Institute of Economic and Social Researc, who last week predicited economic growth won’t resume until 2012.

That said, some economists support the Treasury position: for instance almost half the City analysts polled this week by Reuters thought Britian’s economy will at least stabilise in the last three months of the year – some even predected a resumption in growth.

The Bank of England’s recent report is one reason for optimism. Banks have agreed to start lending to families and businesses in the months ahead. With rising unemployment however, whether families will be looking to borrow when job security is at risk, remains to be seen. Similarly, companies are trying to cut costs with many making redundancies in order to stay afloat – for those companies, borrowing must be off the agenda.

Across the Atlantic, some ecomomists are cheered by President Barack Obama’s recent statement. The President said he sees “glimmers of hope” for a recovery.

Globally, optimism is also on the rise. The Organisation for Economic Co-operation and Development said last week that despite world wide GDP contractions, all major economies are experiencing “tentative signs of improvement” – most notibly in France and Germany.

Signs of green shoot recovery in Britain will do little to lift the sombre mood of an otherwise gloomy Budget. The Chancellor is ready to conceded that during a year-long contraction that started last year, Britian’s economy shrank by more than 3%, the steepest fall for a generation.

We can expect tax rises over the long term as well as substantial spending cuts for the public sector in a bid to balance the books over the coming six years.

Whitehall are currently in negotiations to offer £2,000 to people trading in used card for new models. With redundancies on the rise however, the Government would be aswell offering a discount on around-the-world vacations.

Mr Darling’s prediction of a last quarter recovery is three months later than his previous prediction made last November. Since that time he has amended his statement, admitting he ‘under estimated’ the severity of the recession. Time will tell if he needs to adjust his recovery timeline yet again.

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