Confidence will drive the recovery
According to official data, we are now out of recession. Personally, I don’t know whether to celebrate or not, as I really can’t believe it went on for 18 months. My, how time flies.
We have been in recession for the longest period since quarterly figures were first recorded in 1955 and we are one of the last major economies to come out of the worldwide recession - but only on growth of 0.1%.
This figure is based upon only half the data so far available so, in theory, when the full data is there we could actually see more of an increase in growth. Be warned though, this figure could also be downgraded, meaning we never left the recession anyhow.
Many economists fear that this could be the case once the full data is available, but my view is more upbeat because everyone I speak to in the commercial industry seems to be getting really busy.
A few days ago I made enquiries about further developments to my website but my web-support team said I would have to wait a few weeks because firms that had put jobs on hold last year were now hitting the ‘go’ button.
Meanwhile, when I ordered a new shower door last weekend, I asked the sales department how business was doing. Apparently, it really kicked off for this firm back in November and has been manic since the start of the year.
I also have a friend who is high up in Ford who tells me they can‘t make the Ford Focus quick enough to meet demand.
The other place I decided to enquire was down at my local, The Chapel in Coggeshall, Essex. All in the line of duty, I sampled some bitter and spoke to the landlord who informed me that he was enjoying a good, steady flow of business.
We can all be armchair economists but what I would like to see is all the political parties united in getting things moving for the good of the country instead of listening to their predictable sniping at each other.
I watched George Osborne and Vince Cable on the BBC and I could have written their speeches for them. Each one blamed the other party, as well as the government, in order to point score on primetime TV
My only concern is for those individuals burdened with debts, who will not see any benefit from the upturn. Debt levels will stay the same irrespective of the recession, with interest rates probably rising towards the end of the year to combat inflation.
Most households have been squeezed financially over the past two years, and this could take many months - if not years - to improve.
My marker for getting out of recession and onto a sound recovery is the three ‘Cs’: cash, credit and confidence.
Cash is linked to credit - get more credit in the economy and the cash comes.
Then, once people gain more confidence in their job security they will have the confidence to buy goods and services and use leisure facilities… and away we go.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.