Well finally after all those headlines about UK economic recovery and “we are out of the recession” talk, this week I came across some new which I believe are more realistic. After two of my blogs above which are about retail sector, service sector and increase in Burberry sales and how all that indicates we are getting out of the recession, here is a blog which contradicts all that.
Must say part of me was happy to see headlines like the one from The Independent saying “Too soon to talk of recovery, say Item club forecasters” or the one from BBC News stating “Too early to declare recovery”.
This week I have read three articles from The Independent, BBC News and Sky News Online.
All three articles base their stories on Item club forecasters who use “the same economic forecasting model as the Treasury” so predict how well is economy doing now and how will it be doing in the future. One can argue that this might be a little bit bias, but I choose to believe them because Ernst & Young Item club if the City’s most “influential forecasting group”, well established and as stated above use the same forecasting model as Treasury. The main story is that the forecasting group expects economy to grow a lot less than it was speculated in the news recently. Treasury will release the GDP figures on Friday this week and those figures were long-awaited; they will show GDP for July and September 2009. Expected economic growth for these two months is near zero. Let me just quickly remind you that “British economy has not grown since the first quarter of 2008”. Ernst & Young say that the best UK can hope for 2010 is 1% growth. They also used the word “anaemic” to describe the growth over the next 12-18 months. The group noted that the process of recovery will be painful as the government plans to cut back on spending, tighten the policy, restore VAT to 17.5% (starting from 1st January 2010), increase the National Insurance Contributions, introduce a new 50p tax and introduce a new programme of spending restraints. The group also pointed out that quantitative easing (which is policy of pumping cash into the economy) by Bank of England was “disappointing” and according to BBC News it seems that little of that money ended up increasing bank lending. Furthermore Professor Peter Spencer, Ernst & Young’s chief economist, believes banks used the money to rebuild money reserves and “improve liquidity”.
The story from The Independent is really short with very brief overview of the news. The story does not go into depth and provides the reader with some of Peter Spencer’s quotes. There is a little bit of negative note to the story, but I believe it is because of the nature of the news which is saying that it is not all that good after all. There is clear sarcasm in the sentence “Britain’s economy is widely expected to officially move out of recession on Friday when GDP figures are released for the third quarter of the year”. After this sentence the rest of the story is about not all that positive view of Item Club on the growth of the economy and recovery. Obviously the news is important and it could be said that the news is ‘big’ but the way it was written it is hard to say for who the story was written for.
Article from Sky News I found extremely confusing. Entire article is in quotes and opinion of Professor Peter Spencer. The story is even more pessimistic than the one from The Independent. It uses phrases like “anaemic”, “bumps along the bottom”, “substantial pain next year”, “double dip”; all in relation to economic recovery. Even from reading the headline I was almost sad, “Bumpy 'Recovery To Bring Substantial Pain” followed by the first sentence “Britain is set for a ‘bumpy ride’ along the road to economic recovery, economists warn”. Which economists warn? There is only one mentioned and that is Peter Spencer. I think they should have included more views of different economists. There is even a picture of people shopping and underneath “consumer demand is unlikely to fully recover next year”. Honestly I do not know if the story can get any more pessimistic.
Moving on to the story I liked the most. The article from BBC News was objective and no bias whatsoever. Must admit sub headlines like ‘substantial pain’ and ‘zero growth’ are not very optimistic either but the story overall does not give a completely dark picture of the economy and its future growth. What I really likes it that BBC News knows that not all the readers are familiar this certain economic expressions and therefore give short and precise explanations alongside. The language used is very clear and easy to understand, no metaphors or sarcasm involved. I think that BBC News has the headline which matches exactly what I was trying to say in my previous blog and this one as well and that is “Too early to declare recovery”.
Once again I do believe that after everything that happened in previous year is having big, huge influence on people, economy, government, society as a whole and that there are many thing that need to be improved before we can ‘declare recovery’. Financial services have been fit by economic downturn very hard, even though it could be argued that it was caused by financial services, and jet I read in the newspaper today that bonuses in banks are expected to increase 50% and could reach £6 billion. Not to go away from the original story, but I believe that this increase it bonuses is a though through ides by the banks because they will need to retain people next year as income taxes are going to rise from 40% to 50% for total annual earning more than £150,000.
After all these news I am very excited to see the GDP figure on Friday. I must say that my view of the economy in the future is more less the same as of Item club, but I still hope that the ride to recovery will not be as hard as Item club predicts.
Sources:
The Independant (2009) “Too soon to talk of recovery-say Item club forecasters”
Sky News Online (2009) “Bumpy Recovery To Bring Substantial Pain”
BBC News (2009) “Too early to declare recovery”
URL: http://news.bbc.co.uk/1/hi/business/8313245.stm
AS
Your blog shows a good continuation of theme and you have clearly examined and compared the different views and newspapers as well as showing an understanding of the economic background. 6.5/10
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