The City has already sniffed out that the Bank of England will delay any increase in the cost of borrowing until late this year or 2011 was reinforced by today’s announcement by the ONS breakdown of growth in the first three months of this year, which contained some bad news.
There has been no boost to the economy from exports, despite the 25% depreciation in the pound from 2007 to 2009.
Consumer spending actually fell slightly. Had it not been for the contribution to growth made by the government, the economy would have dipped back into recession during early 2010.
Activity is likely to have picked up a little in the second quarter, and growth of around 0.5% might be expected when the flash estimate is released by the ONS later this month.
However, this may be as good as it gets.
Consumers ran down their savings to fund spending in the first quarter, but will be reluctant to continue doing so at a time of rising unemployment, sluggish wage growth and falls in house prices.
The public already seems to be getting the message that tough times are ahead. For the economy as a whole, the outlook is similarly bleak. Exports are struggling, the consumer sector is depressed and the prop from the public sector is about to be kicked away.
The second half of 2010 will be dominated by talk of double-dip recession.
Tough times ahead, recruitment demand, except where skills shortages exist, has dropped very quickly since the budget with Employers taking a wait and see stance.
Author: Chris Slay
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