Thursday, 4 June 2009

"It's all over now?"

(By Richard Holway 7.00am 4th June 09) Provided you aren’t Gordon Brown, or one of his dwindling band of supporters, there are currently more ‘good economic news’ stories in the newspapers than in a long time. Hot on the heels last month of a CBI quarterly survey of confidence in the Services Sector which 'showed that the scale of the slump in business has slowed and sentiment has picked up", today’s Daily Telegraph was typical with Services growth may signal recession’s end .

“According to the respected Purchasing Managers' Index (PMI), activity in the services sector - which accounts for three quarters of gross domestic product (GDP) - jumped above the crucial 50 mark which separates contraction from expansion. Rising three points to 51.7 from 48.7 in May, it was the first time the sector had shown growth since April last year.

Allan Monks, an economist at JP Morgan, said the services PMI sent "a fairly clear signal that the recession ended in May."

Similar stories related to recovery in the US economy as in today’s FT US sees light at the end of the tunnel

Of course, the SITS sector that we study is firmly entwined with the Services Sector – so all this could be pretty good news. To be blunt, though, I haven’t heard any of this from the CEOs I talk to. I do admit that there is a “depression counter-reaction” – as in Philip Green’s quote “we are all fed up with being fed up”. As we said in our article – Dwindling Millionaires on 27th May 09 – any upturn will depend more on ‘confidence’ than ‘cash’.

We still hold to our prediction that the upturn will only be apparent in the UK SITS sector in H2 2010. But, I guess, this is one prediction where I’d be delighted to be proved wrong.

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