BCC calls recession bottom
But gov could still stuff it up
The British Chambers of Commerce has called the bottom of the recession.
In its latest survey of 5,600 companies the BCC found some confidence returning, but warned it was early days to talk of real recovery.
But the lobby firm warns that the government needs to act to protect their view that "the worst is over". The group noted that GDP figures were revised downwards just last week, and that a W-shaped recession remains a possibility.
David Frost, director general of the BCC, signs of improvement should not be seen as an excuse for the government to start raising business taxes and called for the immediate end of proposed increases in National Insurance contributions.
The small business lobby group said the strongest feature of its survey was improved confidence compared to last quarter - which was the worst ever.
Turnover confidence is up 40 points, from -38 last quarter, putting it in positive territory for the first time since Q3 last year.
There has been some improvement in expected employment too, although the BCC still expects unemployment to hit 3.2m (ten per cent of the workforce) by 2010.
David Kern, chief economist at the BCC, said: "The worst phase of the recession is over, but serious downward pressures persist across all sectors and regions. Recovery is now possible but it is not yet secure.
“Further corrective measures are still needed to support the economy. The marked improvement in confidence, albeit from exceptionally low levels, is welcome."
Kern said the benefits would only be maintained if short-term policy "stays expansionist" and "Quantitative easing should be pursued aggressively".
But he warned that maintaining Britain's international credit rating would require action to improve public finances which in turn would mean: "painful cuts to spending programmes must be the main tool for repairing our public finances”. ®
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COMMENTS
Push vs Pull, Causality vs Correlation
"David Kern, chief economist at the BCC,....benefits would only be maintained if short-term policy "stays expansionist" and "Quantitative easing should be pursued aggressively".
IMHO
Scenario 1: Growth as Causality for Inflation
Companies grow, they borrow more money to fund expansion, the money is created from thin air, the money supply grows (i.e. inflation) but the currency holds it's relative value because the money supply has grown as a result of real growth.
Scenario 2: Inflation as Causality for Inflation
Government spends, borrows money from central bank which prints money in response (a fake loan because the central bank never refuses it's own government loans).There's no real growth there, when the government stops digging holes and filling them in again, there is no new market created and the digging-filling industry is once again in collapse. For a while the money supply matched the growth, but the growth is from pushed money, (a blown bubble), not pulled money (sustainable growth). The spending stops and the growth goes away.
Yet both scenarios look like growth in an economists model, which is why economists make lousy CEOs, they don't understand real markets and can't tell the difference between blowing a asset bubble and creating a new product segment.
Worse still, when Governments spend money, they distort the market. They order 10 million blue widgets to help the blue widget market, but it draws money away from the orange widget market, which didn't need help.... when the spending stops, blue widget companies are everywhere but still nobody wants blue widgets and they've destroyed the orange widget companies.
They've delayed the restructuring of the blue widget market and damaged the orange widget market.
The end game here is a collapse in Sterling, to fund the next round of growth, Brown will have to spend more, and borrow more. Each round has to be bigger than the last round by at minimum the inflation he creates. Even if he does it quickly before the bubble collapses again.
If he waits for the deflate, he has to spend even more, but the result is inevitable, sooner or later the fake asset bubble he tries to create will collapse, because there is no real demand there that needed filling and so the supply is in excess of the *real* demand and must fall back.
Sweden has essentially gone negative on interest rates, which is to say that the Swedish Krona has no future as a currency, they can't sell it, they can't even give it away. Sterling, likewise will likely fail if Brown continues to print money to fund spending which is all that quantitative easing really is.
http://globaleconomicanalysis.blogspot.com/2009/07/sweden-cuts-deposit-rate-to-negative-25.html
My wifes employer (importer from China + Philippines) use to have to pay in US$, now she pays in Euros, as her trading partners increasingly price their products in Euros. I think it is because the Euro is run like it has value and is a proper currency.
I think GBP is not, and I think this BCC economist is making the same mistake all Keynsian economists do and thinking inflation is inflation is inflation whether it's from governments pushing money or companies pulling it.
@Optimists
"Looks pretty grim from where I'm standing."
Then do as the government does and address the *real* problem - stand somewhere else.
Always identify the problem and then solve another one (preferably one that doesn't exist), that is the way Nu Labia have operated for years.....
Insulting it won't make it go away.
May I be the first to call the BCC "bottom" in return? Only a bunch of arses would claim they know what's going on (or what irrelevant stupid thing the world's governments may do next in the name of fixing a problem they are clueless about. too).
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