Key Indicators Improving but Recovery Not Guaranteed Warns BCC

The latest British Chambers of Commerce (BCC) Economic Survey shows welcome progress in both the manufacturing and service sectors over the last three months with most key indicators improving.  However, almost all the critical measures remain in negative territory and many are still weak by historical standards says the BCC.

Data from the 5,600 companies who participated shows that firms in the manufacturing sector recorded stronger improvements in the last quarter (Q2) than  those in the service sector, although in absolute terms, the manufacturing sector remains in a worse condition overall.

One of the notable features of the Q2 results is a marked strengthening in confidence amongst firms which reverses sharp declines over the previous two quarters.  A larger proportion now expect turnover to rise than fall in the coming quarter – the first time this has been the case for nearly a year.

The employment expectations of firms in both sectors also saw gains this quarter, but the BCC is still predicting that unemployment will reach 3.2 million - some 10 per cent of the workforce - by mid 2010. 

And it is at pains to point out that while the survey’s results finally point to some good economic news, there is a risk that without a continued focus on limiting the impact of recession, the economy could drop-off suddenly, adding weight to the argument that we are heading towards a W-shaped recession. With official GDP figures revised heavily downwards only last week, it is far too early to say that recovery is secure.

David Kern, Chief Economist at the BCC, commented: “The pace of decline in the UK economy is clearly moderating. The worst phase of the recession is over, but serious downward pressures persist across all sectors and regions. Most key balances are still in negative territory and remain weak by historical standards. 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. However, these recent gains can only be sustained if the economy continues to stabilise and the recession ends.”

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