British indicators improve

The British economy appears to have embarked on a broad-based recovery, with construction industry expanding for the first time in over two years, the job market strengthening and business growing increasingly confident about the outlook, according to surveys from the British Chamber of Commerce and Markit Economics.

But the BCC said the recovery is still weak and there remain serious risks of a setback. In its latest quarterly economic survey, the business group said that the economy grew in the first quarter, but suggested the recovery was sluggish. Although the service sector is gradually gaining momentum, the manufacturing sector is struggling to recover, it said.

Official first-quarter gross domestic product figures are due April 23. U.K. GDP grew 0.4% in the final three months of last year after shrinking in each of the previous six quarters.

The BCC report showed employment expectations were weak, but a separate monthly survey by Markit Economics suggested the U.K. labor market is on the mend, with a strong increase in hiring in March. Salaries given to successful job candidates also rose.

“The U.K. jobs market seems to be going from strength to strength, with permanent job placements growing at the fastest rate for 12 years,” said Bernard Brown, partner and head of business services at consultancy KPMG. He cautioned that much of the recent hiring activity was in the state sector and that the prospect of lower government spending and higher taxes in the next 12 months could derail the labor-market recovery. Conditions are improving in the British construction sector – one of the hardest hit by the credit crunch and ensuing recession – with activity expanding for the first time in two years in March.

The Wall Street Journal April 2010

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Eu consumer spending is likely to remain slow

Euro-zone consumers hit by mounting job losses are unlikely to support the currency area’s nascent economic recovery by spending heavily in the months ahead.

The European Union statistics agency Eurostat said the unemployment rate in the 16 countries that use the euro rose to the highest level since records began in 1999. The euro zone jobless rate inched up to 9.7% in September from 9.6% in August.

Recent surveys have indicated that despite the rise in unemployment, consumers are becoming less pessimistic about the economic outlook. But it may be some time before they feel secure enough to increase spending.

With the euro zone’s recovery far from secure, the European Central Bank is unlikely to raise its key interest rate in the coming months. Its governing council next meets on Nov. 5, and the bank’s key interest rate currently stands at 1%.

Still, there appears to be very little sign that inflation will be a threat in the foreseeable future.

Figures released Friday by Eurostat showed that in October, consumer prices in the euro zone were lower than in the same month of last year. It was the fifth straight month of deflation, although the decline in prices eased, to 0.1% from 0.3% in September.

The October reading is broadly in line with the ECB’s expectations. The bank has said it expects inflation to return soon, although it doesn’t see a rapid pick-up toward its target, which is an inflation rate just below 2% over the medium term.

The Wall Street Journal October 2009

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